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Index outlook: Be cautious of the key hurdles for Sensex, Nifty this week

Yoganand D | Updated on April 03, 2021

Await cues from global market for further direction

The domestic benchmark indices — the Sensex and the Nifty 50 — advanced higher amid volatility last week. The indices are likely to take cues from global markets for the direction this week.

Nifty 50 (14,867.3)

The Nifty 50 index advanced 360 points, or 2.5 per cent.

The week ahead: The index now tests its 21- and 50-day moving averages and is poised marginally above key resistance level of 14,815. It can continue to move higher and test the subsequent vital resistance ahead at 15,000-mark which is a psychological barrier . A conclusive breakthrough of this barrier will bring back bullish momentum to the index that will have the potential to take it northwards to 15,200 and then to 15,400 levels over the short term. Failure to move beyond 15,200 can witness a minor pull back before the index tests the crucial hurdle at 15,400 levels.

The daily relative strength index (RSI) is hovering in the neutral region and the weekly RSI continues to feature in the bullish zone. Also, the daily price rate of change indicator has entered the positive terrain, implying buying interest and the weekly price rate of change indicator features in the positive terrain, signifying buying interest.

On the downside, a fall below the immediate support level of 14,500 can drag the index down on the back of selling interest, to 14,400 and then to 14,280 levels. Next crucial support for the index is pegged at 14,000 levels. We reiterate that a further fall below the significant support level of 14,000 is needed to bring back selling pressure and pull the index downwards to the following support in the 13,500-13,600 band.

Medium-term outlook: There is no major change in the medium-term uptrend that has been up since the December 2020 low of 13,131 levels. Moreover, the intermediate-term trend has been up for the index since it took support at 10,790 last September. We restate that the intermediate-term uptrend will remain in place as long as the index trades above the vital base level of 12,750. A conclusive plunge below this base will invalidate the uptrend. In that scenario, the index can plunge to the ensuing support levels of 12,400, 12,260 and 12,000 over the medium term.

On the upside, the index needs to conclusively break above the key barrier at 15,000 so that it can trend upwards to reach the resistance level of 15,200 initially. The key resistances thereafter are placed at 15,300 thereafter at 15,500 and 15,600.

Conversely, if the index slumps below the key base level of 14,000 the medium- term uptrend will be in threat. In that case, the index can extend the down-move to succeeding support zone of 13,500-13,600. A downward breakthrough of 13,500 can drag the index lower to the next support level of 13,330 and then to 13,000 over the medium term.

Sensex (50,029.83)

The Sensex managed to advance 1,021 points or 2.08 per cent in the midst of choppiness in the past week. It now tests the 21- as well as the 50-day moving averages and the key psychological resistance level at 50,000. An emphatic breakout of these barriers can reinforce the medium-term uptrend and take the index northwards to 51,000 in the short term. A strong up-move above this levels can pave the way for a rally to 51,400 and then to 52,000 in the ensuing weeks. We restate that a clear breakthrough of 52,000 is required to strengthen the uptrend and take the index northwards to 53,000 and then to 54,000 over the medium term.

On the other hand, if the index plummets below the key base level of 49,000 then it can test the recent level of 48,236 recorded in late March this year, with a minor pause at around 48,600. Key support thereafter is placed at 48,000 and a slump below this level will mar the medium-term uptrend and drag the index down to 47,000 and then to 46,000 in the ensuing weeks.

The uptrend that commenced from the September 2020 low of 36,495 will remain intact as long as the index trades above the key medium-term base level of 45,000. Supports thereafter are at 44,520 and 44,000 levels. Investors with a long-term perspective can stay invested with a stop-loss at 40,000.

Nifty Bank (33,858)

Last week, the Nifty Bank advanced 539 points ,or 1.6 per cent. The index has an immediate resistance in the band between 34,000 and 34,200 that could slow down the current rally. A decisive breakout of this resistance zone is needed to bring back buying interest and push the index northwards to 34,550 levels where the 50-day moving average is poised.

A breach of this level on the upside will take the index higher to 35,000 levels. A definite breakout of the resistance in the 34,800-35,000 band is essential to take the index upwards to 36,000 in the short term. Subsequent resistances are placed at 36,500 and 37,000. Traders can initiate fresh long positions on a strong rally above 34,200 levels with a fixed stop-loss. The intermediate-term uptrend that has been in place from the September 2020 low of 20,400 will remain in place as the index trades above 29,000 levels. The supports below 29,000 are at 28,500 and 28,000.

But a fall below the near-term support level of 33,000 that provided base recently, can drag the index lower to 32,000 in forthcoming weeks. A further decline below 32,000 can reinforce the downmove and pull the index down to 31,000 and then to 30,000 levels.


(This is a free article from the BusinessLine premium Portfolio segment. For more such content, please subscribe to The Hindu BusinessLine online.)

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Published on April 03, 2021
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