THE NIFTY WITNESSED ELEVATED VOLATILITY AS IT OSCILLATED BY ~1200 POINTS DURING THE WEEK TRACKING

The Nifty witnessed elevated volatility as it oscillated by ~1200 points during the week tracking global volatility on account of US inflation data. The weekly price action formed an inside bar that confined within last week’s trading range of 17428-16855, indicating extended consolidation while absorbing elevated global volatility. In the process, despite rise volatility, India VIX (which gauge the market volatility) has corrected 3% over third consecutive week, indicating that market participants are not expecting major turmoil in the near term. 

Going forward, we expect Nifty to gradually surpass the upper band of consolidation placed at 17500 levels in a non-linear fashion and eventually head towards 18000 in coming weeks, amid onset of Q2FY23 earnings and festive season. Key point to highlight is that, over past six weeks, on numerous occasions index witnessed buying demand in the vicinity of 200 days EMA placed at 16900, thereby rewarding buying on dips strategy amid global volatility. We maintain our stance of buying dips as we expect 16700 to be held. Our positive view on the market is based on following observations: A) Historically, over past two decades, Q4 returns for Nifty has been positive (average 11% and minimum 5%) on 15 out of 21 occasions (70%). The history favours buying dips from hereon B) US Dollar/INR pair has approached key trend line resistance around 83.30 mark. Since 2015 on multiple occasions pair has reversed lower from this trend line amid extreme overbought readings on weekly timeframe. Stability in rupee against US dollar would support Indian equities in coming weeks.

Nifty Bank: 39305

The weekly price action formed a bull candle which remained enclosed inside previous week’s high -low range signaling consolidation amid stock specific action. 

Going forward, we expect index to gradually surpass last two weeks almost identical highs placed around 39600 and head towards 40500 levels in coming weeks being the measuring implication of the last six sessions consolidation range . Dips on account of global volatility should be used as a buying opportunity.