Pick Of The Day

Index Outlook: Will Nifty 50 rebound from its 21-DMA?

Yoganand D BL Research Bureau | Updated on August 01, 2021

Investors’ focus will be on July month auto sales numbers, RBI’s MPC meeting, rupee movement and crude oil action

Both the Sensex and the Nifty 50 saw an initial decline before recovering in the later part of the past week. But the benchmark indices marginally closed in the negative zone and lack fresh trigger to trend upwards. Global markets were weak in the past week. Going forward, the investors’ focus will be on the July month auto sales numbers, the RBI’s MPC meeting, rupee movement and crude oil action.

On the global front, the focus will be on China trade and the July US jobs report on Friday will be key for markets.

Nifty 50 (15,763.05)

After an initial decline, the Nifty 50 index recorded an intraweek low at 15,513 last Wednesday and reversed higher. It failed to close above the key resistance level of 15,900 and ended the week negative, declining 0.59 per cent. It now tests the 21-day moving average.

The week ahead: Yet another volatile week and range-bound movement were witnessed in the Nifty 50 index. We reiterate that the index has been in a sideways consolidation phase broadly in the range between 15,500 and 15,900 since early June this year. It tests the 21-day moving average and has paused slightly above the 50-day moving average. A decisive decline below the immediate support level of 15,600 will show initial sign of weakness. A fall below the next base level of 15,500 will alter the sideways trend and pull the index lower to 15,300 and then to 15,000 levels.

 

The index continues to face significant resistance ahead at 15,900. To alter the sideways trend on the upside, it needs to emphatically breach the vital barriers at 15,900 and the 16,000-mark, a psychological level. Such a breakthrough can underpin the bullish momentum and take the index higher to 16,200 initially and then to 16,400-16,500 band in the short term.

However, failure to move beyond 16,000 or a break below 15,500 can keep the index range-bound for a while. The short to medium-term uptrend will stay intact as long as the index trades above the support level of 14,800. A conclusive fall below 14,800 will undermine the uptrend and pull the index down to the next supports at 14,500 and then at 14,200. Subsequent supports are at 14,000 and in the 13,500-13,600 band.

Medium-term outlook: With the index being range-bound in recent times, the medium to intermediate-term uptrend that has been in place from the December 2020 low of 13,131remains. We reaffirm that this primary uptrend will stay intact as long as the index trades above the dynamic support level of 14,000. Key medium-term supports are placed at 15,500 and 15,000, which can provide base on a corrective decline. Only a strong plunge below 14,000 will change the medium-term uptrend and pull the index down to the 13,500-13,600 band and then to 13,000 levels over the medium term.

On the upside, a conclusive break above 16,000-mark can accelerate the uptrend and take the index to 16,500 levels in the medium term.

Sensex (52,586.84)

The Sensex fell 0.7 per cent last week in the midst of volatility. It took support at around 52,000 and recovered but tested resistance at 53,000 on the upside. This level continues to act as a crucial hurdle for the index. We restate that an emphatic break above 53,000 can take the index northwards to 53,500 and then to 54,000 levels over the medium term.

Immediate supports are at 52,370 and 52,000, which can cushion the index in case of a corrective decline. Nevertheless, an emphatic slump below 52,000 level will alter the sideways movement and start weakening the short-term uptrend. In that scenario, the index could decline to 51,400 initially and then to 51,000 levels over the short term.

The medium-term uptrend that started from the April low at around 47,204 will stay in place as long as the index trades above the 50,000-mark. That said, a conclusive fall below this support level will threaten the uptrend and drag the index lower to 49,000 and then to the 47,700-48,000 band over the medium term. Investors with a long-term perspective can remain invested with a long-term stop-loss at 42,000.

Nifty Bank (34,584.3)

The Bank Nifty continues to underperform the bellwether indices and declined 450 points or 1.28 per cent in the week ago. It has failed to surpass the 21- and 50-day moving averages and trades slightly below them. The index faces key resistance at 35,000. Only a strong break above 35,000 will bring back bullish momentum and take it higher to 35,350, 35,750, and then to 36,000 over the short term. A strong rally above 36,000 can take the index higher to 36,500.

On the downside, it has an immediate support at 34,000. A decisive fall below this base level will alter the uptrend that began from the April low of 30,405 levels and reinforce the bearish momentum. In that case, the index can decline to 33,000 and then to 32,000 over the medium term.

Traders should avoid taking fresh positions as long as the index trades in the band between 34,000 and 35,000.

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

Published on July 31, 2021

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor

You May Also Like