Gold, Rupee and Equity Markets Outlook: Details explained by ICICI Securities

Gold prices started Monday’s trade on a strong note opening higher with a gap and rose further during most of the session till a high of Rs 46966. Prices bounced strongly in the last session as support from a weaker dollar eclipsed pressure from former Treasury yields. Therefore, ICICI Securities expect gold prices to recover further towards Rs 47200 level in the short-term.
 
The US$INR future continued to appreciate against the dollar and moved below our target levels of Rs 72.50. ICICI Securities believes it should consolidate around these levels while upsides can be used as shorting opportunities once again. The dollar-rupee February contract on the NSE was at Rs 72.46 in the last session. The open interest increased almost 5% in the February series. Intra-day strategy is to Sell US$INR in the range of Rs 72.68 – Rs 72.72. 

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Market Outlook:
 
Equity benchmarks started monthly expiry week on a negative note tracking weak global cues. The Nifty ended the session at 14676, down 306 points or 2%. The market breadth stayed negative with an A/D ratio of 1:2.5. Sectorally, barring metal, all other indices ended in red weighed by auto, pharma, and financials.
 
Technical Outlook:
 
The daily price action formed a sizable bear candle while maintaining a lower high-low, indicating extended correction after the 13% post Budget rally. In the process, the index almost approached near their target of 14600 after retracing 38% of the February rally (13597-15432), at 14730.
 
Going ahead, ICICI Securities believe extended correction from here on would offer an incremental buying opportunity as ICICI Securities do not expect the index to breach the key support threshold of 14300. Hence, any dip from here on should not be construed as negative. Instead it should be capitalised on to accumulate quality large cap stocks in a staggered manner. Meanwhile 14900 would act as immediate resistance as it is 38% retracement of the ongoing corrective phase.
 
ICICI Securities constructive bias on the market is based on following observations:
 
1)     since May 2020, the index has not sustained below its 50 days EMA. That subsequently offered a fresh entry opportunity. Currently, the 50 days EMA is placed at 14320
2)     price wise, the index has not corrected for more than 8- 9%. In the current scenario, 8% correction from life-time highs would be at 14200
3)     Time wise, secondary correction has not lasted for more than a week, since May 2020
 
ICICI Securities expects the index to maintain the rhythm of aforementioned price and time wise correction. The ongoing healthy retracement would make the market healthy from a larger term perspective and pave the way for the next leg of the up move in coming weeks. In the process, the relative outperformance of the broader market would endure