Buy the dips amid global volatility, with eyes on earnings

Indian equities extended relative outperformance against US markets (which is down 1.5% as on Wednesday) post temporary tariff relief. Nifty settled the week at 23850, up 4.5%. Sectorally, all major indices ended in green led by Financials , Defence, Infra. Meanwhile, Gold recorded new high of $3358

What to expect: We reiterate our positive stance of Nifty heading towards 24200 in coming week. Key point to highlight is that, over past seven session's Nifty has rallied ~10% which hauled daily stochastic oscillator in overbought conditions. Hence, couple of days breather at higher levels cannot be ruled out which should capitalised to accumulate quality stocks amid ongoing earning season. In the process, 23300 would act as immediate support for the coming week.

Faster retracement: 
Nifty The index has retraced past nine sessions decline in just six sessions. Faster pace of retracement signifies, improvement in broader structure

Bank Nifty retraced six months decline in just two months, indicating structural turnaround that bodes well for durability of ongoing up move as Bank Nifty carries 34% weightage in Nifty

Structure: In tandem with historical evidences, buying demand emerged after approaching price and time wise maturity. Historically, since 2002, within a structural bull market, price wise maximum intermediate corrections have typically been to the tune of 18% (barring 2004 & 2006). Meanwhile, time wise such corrections last for average 8-9 months. In tandem with the historical evidence, with past seven months 17% correction Nifty staged a strong rebound.

Empirically, buying in such scenario has been rewarding, delivering an average return of 23% over the subsequent twelve months. Hence, dips should be capitalized to accumulate quality stocks to build portfolio from medium term perspective

Global Macros: Two years range breakdown in US Dollar index coupled with cool off in Brent crude oil price augurs well for pullback in emerging markets