ICICI Direct - Momentum Picks (March 30): Index to consolidate with positive bias in upcoming truncated week..

Market Outlook

Equity benchmarks extended corrective phase over a second consecutive week amid elevated volatility due to monthly expiry. Nifty closed at 14507, down 1.6%. Sectorally, pharma, IT, metal outshone while auto, financials, infra underperformed. Broader market extended breather as Nifty midcap, small cap fell 0.7%, 2.6%, respectively.

Technical Outlook

- The weekly price action formed a bear candle carrying lower high-low, indicating extended correction. Meanwhile, a lower shadow signifies supportive efforts emerged after retracing 61% of February rally (13597-15432), at 14300 which coincides with budget day gap area (14281-14469)

- Key point to highlight is that despite host of negative news around rising Covid-19 cases, the index has managed to close above key support of 14400 (on a weekly closing basis), indicating inherent strength. Since March 2020, Nifty has maintained a rhythm of not correcting for more than average 9% and time wise correction has not exceeded for more than 3 consecutive weeks. We expect this rhythm to be maintained. In current scenario, the Nifty has already corrected 7.5% from all-time high of 15432. Therefore, price wise damage from hereon will be limited. Hence, any panic sell off from should be capitalised on to construct portfolio from medium term perspective. Meanwhile, 14800 would act as immediate resistance for the upcoming truncated week

- On the sectoral front, we expect IT, pharma, financials and FMCG to relatively outperform. On the stock front, in large cap space we remain constructive on TCS, Asian Paints, HUL, HDFC, Reliance Industries, Divis Laboratories along with FSL, Birla soft, Balkrishna Industries, Tata Chemical in midcaps

- Nifty midcap and small cap indices extended breather and approached the vicinity of their 50 days EMA coincided with upward sloping trend line, which has been held on multiple occasions since June 2020. Key point to highlight during recent correction is that, the Nifty midcap and small cap indices have maintained the rhythm of not correcting for more than 9-10% since March 2020. In the current scenario, both indices have corrected 9% while sustaining above 50 days EMA.

- Structurally, we believe extended breather from here on would get anchored around key support zone of 14000-13900, as it is:

* 80% retracement of February rally (13597-15432), at 13964

* 9% correction from life high is placed around 14000


* 100 days EMA is placed at 14000

For details, click on the link below: https://www.icicidirect.com/mailimages/Momentum_Picks.pdf

Source : Equity Bulls

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