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Eyes on reciprocal tariffs, in truncated week

ICICIdirect Research 28 Mar 2025 DISCLAIMER

Indian equities snapped its five months corrective phase (longest ever losing streak in three decades) and settled the volatile week on a positive note. Sectorally, financials remained at forefront along with Defence, IT and PSU for the week

What to expect: The follow through strength after breaking out of six months falling trend line confirms resumption of uptrend that makes us revise target upward at 24200 for coming weeks. However, one should note that index has rallied >1500 points in past seven sessions which hauled daily stochastic oscillator in overbought territory, indicating possibility of temporary breather cannot be ruled out.
In the upcoming truncated week, volatility would remain elevated on account of reciprocal tariff announcement. Hence, extended breather from here on should not be construed as negative instead utilise it to accumulate quality stocks as strong support is placed at 23000, above which expect index to form a higher base. Our positive bias is further validated by following observations:

Faster retracement: The index has retraced past 19 sessions decline in just 14 sessions, indicating structural turnaround

Bank Nifty : The swift up move in banking space helped Bank Nifty to surpass past two months high, suggesting inherent strength 

Structure: Current up move of 9% is strongest since September that confirms conclusion of corrective bias. As a result, previous five-month “sell-on-rally” approach has now shifted to a “buy-on-dips” strategy as sentiment has improved

Breadth: Significant improvement in market breadth augurs well for durability of ongoing up move as currently >50% stocks of Nifty 500 universe are trading above their 50 days SMA compared to early March reading of 7 

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