THE NIFTY WITNESSED A GAP DOWN OPENING (18157-18044)

The Nifty witnessed a gap down opening (18157-18044) tracking weak global cues and subsequently drifted downward. The daily price action formed a bear candle carrying lower high-low, indicating extended breather after recent sharp up move 

The sustenance above one year falling trend line despite volatile global cues makes us reiterate our structural positive stance and expect the Nifty to challenge the all-time high of 18600 in coming couple of week. The index is likely to witness gap up opening tracking strong rally in global market post outcome of US inflation data. In the process, US Dollar index decisively breached eight months rising channel coincided with key support of $110 that augurs well for acceleration of upward momentum in global equities. Thus, any dip from here on should be used as incremental buying opportunity as we do not expect index to breach the key support of 17800. Our positive stance on the market is further validated by following observations: a) Over the past two decades, Q4 returns for the Nifty have been positive (average 11% and minimum 5%) on 15 out of 21 occasions (70%). History favours buying dips b) India VIX, which gauges market volatility, has recorded five month’s range breakdown and is trading below 16, indicating low risk perception among market participants c) Indian equities continued to relatively outperform their global peers, showing inherent strength d) US indices oversold: Percentage of stocks above 200-dma for S&P500 and Nasdaq has approached bearish extreme of 15 and 12. Over two decades, readings below 15 and 12 have led to meaningful durable bottoms. We therefore expect US indices to pose technical pull backs from oversold readings

Nifty Bank: 41603

The daily price action formed a small bull candle as the index opened lower amid weak global cues . However, buying demand at lower levels saw the index recovering most of the intraday decline and closed the session marginally lower by 0 . 4 % . Index in today’s session opening gap up amid positive global cues highlighting continuation of the positive momentum 

Going forward, we reiterate our positive stance as we expect the index to extend the current up move and head higher towards 42900 levels in the coming weeks being the 123 . 6 % external retracement of the recent breather (41840 -37386 ) . Dips on account of global volatility should not be constructed as negative instead should be used as a buying opportunity