Nifty begins July series at inflection point, sustenance at current levels key to reach new highs

The markets are in a structural uptrend and are expected to sustain the 11,750 mark.

After making an all-time high at 12,103 on the 1st trading session of June, Nifty spent the rest of the month in a corrective mode. Though there were few stock specific shorting opportunities during this period, the ranging price action was quite annoying for most short-term traders as it lacked directional bias in either direction.

Selling pressure was visible in the midcap space as the Nifty200 breadth remained weak. Bank Nifty witnessed selling pressure for the first half of the series, however, a smart recovery was seen in the last few trading sessions.

During this contra trend period, the putative swing low (of 11,625) in Nifty50 was formed near the gap support area of 11,600-11,400. We have already seen a decent recovery from those levels and going forward, this zone should play the role of major support. An open interest concentration in JULY 11500PUT Options is also reflective of immediate support near the same.

The market breadth data provides an overall picture of the 'general health' of the market. Recent breadth data suggests that the sentiments are gradually improving and bulls are trying to stage a comeback.

Last week, the number of stocks trending with strong positive momentum was at a mere 9 percent, but has improved to 15 percent this week. This shows the gradual shift in sentiment and is an inkling towards bullish markets ahead. Our analysis shows that we are standing at an inflection point and sustenance at current levels could trigger an aggressive thrusting move towards fresh highs.

Above 11,800, Nifty50 is expected to test levels of around 12,200-12,300 initially. If breadth continues to support then we could also witness 12,700-12,900 in the next few months.

Price action below 11,750 could induce weakness in the market and can lead to a possible 5-7 percent correction in the near term. Support for BankNifty is seen at 30,200, below which it may plummet to 29,500 levels.

In our opinion, the markets are in a structural uptrend and expected to sustain the 11,750 mark.

On the sectoral front, we expect metals and financial services to outperform. Media and pharma stocks are still not out of the Bear grip.

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