Gold and Equity Markets Outlook - Details explained by ICICI Securities

Gold prices started Wednesday’s trade on a strong note opening higher and rose further during the first half of the session till a high of  Rs 48374. However, prices did not sustain at higher levels and corrected gradually during the remaining session till a low of  Rs 47822. Overall, prices remained supported in the last few sessions as investors weighed a weaker dollar and the prospects of more US stimulus amid rising inflation expectations. Hence, ICICI Securities expect gold prices to remain positive towards Rs 48500 level in the short-term.
 
The daily price action formed a high wave candle carrying shadows on either side, highlighting stock specific action amid elevated volatility. Despite initial sell-off, buying demand emerged from the psychological support of 15000 at the fag end of the session. This helped the index to recover 165 points from the day's low and end above the previous session’s low of 15064, indicating overall positive bias. 
 

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Formation of a higher peak, through on a larger degree chart signifies robust price structure making us confident to reiterate ICICI Securities positive stance on the index. ICICI Securities expect it to gradually head towards our earmarked target of 15500 in the coming month. ICICI Securities believes the ongoing breather amid stock specific action would help the index to cool off overbought condition of daily stochastic oscillator (currently at 84) formed due to past seven session’s 1660 points sharp rally and make the market healthy. Thus, ICICI Securities strategy of capitalising on dips to go long in quality large cap and midcap has been working well as we expect the index to unfold the next leg of rally towards 15500 that is 161.8% external retracement of past two week’s fall (14754-13596), at 15466.
 
In line with ICICI Securities view, the broader market endured its northbound journey and relatively outperformed the benchmarks. In the process, the Nifty Midcap index clocked a fresh record high. However, the small cap index is still 20% away from it's all-time high. Therefore, ICICI Securities expect small caps to witness catch up activity within broader market space.
         
Structurally, ICICI Securities do not expect the index to breach the key support threshold of 14600. Hence, any temporary breather from here on should not be construed as negative. Instead, it should be capitalised on to accumulate quality stocks as ICICI Securities expect elevated buying demand to emerge around 14600, since it is confluence of 38.2% retracement of current up move (13597-15257), placed at 14622 coincided with earlier consolidation breakout area around 14650.