Technical Analysis

Index Outlook: All eyes on the Budget

Yoganand D | Updated on June 30, 2019 Published on June 29, 2019

The key benchmark indices moved marginally higher last week

The domestic equity indices — the Sensex and the Nifty — remained choppy, but managed to close in the green, thanks to a good rally in PSU banks. The indices remain range-bound ahead of the upcoming Budget. Auto sales number for June and better clarity on the progress of monsoon, are also likely to lend direction to the markets. On the global front, the US and the UK GDP data and crude oil movement need a watch. US China trade talks also continue to keep markets on tenterhooks.

Nifty 50 (11,788.8)

Last week, the Nifty index found support at around 11,700 and bounced back. However, it witnessed selling pressure at higher levels and retreated marginally after testing a resistance at 11,900 levels. Amid volatility, the index managed to close on a positive note, climbing 64 points or 0.55 per cent. The index is currently range-bound between 11,650 and 11,900 ahead of the Budget. Any correction can test supports in the 11,650-11,700 zone. An emphatic plunge below 11,650 can drag the index down to 11,600, which is the ceiling of the gap that occurred in late May. Such a down-move will weaken the short-term up-trend and indicate the possibility of a trend reversal.

We reiterate that a decisive fall below the significant support level of 11,600 can drag the index lower to 11,500 or 11,400 levels over the short term. A further decline below 11,400 will mar the short-term up-trend that has been in place since February. In such a scenario, the index can trend downwards to the next key support levels at 11,250 and 11,150. Investors with a medium-term perspective can remain invested with a stop-loss at 11,350 levels.

On the other hand, a strong break above the key immediate resistance level of 11,900 can bring back buying interest and take the index higher to a subsequent resistance in the 12,000-12,040 range. A further rally above this zone will underpin the bullish momentum and take the index northwards to 12,200 and 12,500 over the short-to-medium term.

Medium-term trend: The index was range-bound last week. The medium-term up-trend will remain intact as long as the index trades above the major support in the 11,000-11,100 zone. An emphatic breakthrough of 12,000 will strengthen the up-trend, and can push the index higher to 12,500 in the medium term.

Equally, a fall below the 11,000 mark will mitigate the medium-term up-trend. Such a fall can drag the index down to the next key supports at 10,800 and 10,600 over the medium term. Near-term supports are at 11,700 and 11,500.

Sensex (39,394.6)

The key near-term support at 39,000 cushioned the fall in the Sensex last week. The index managed to advance 200 points or 0.5 per cent. On the upside, the resistance at 39,800 capped the rally. Over the past five weeks, the index has been in a sideways movement in the wide range between 39,000 and 40,200. For a clear short-term direction, the index has to break out on either side of this range. We restate that a conclusive fall below the support level of 39,000 can drag the index down to 38,600 and 38,000 levels in the short term. But, to alter the short-term up-trend that has been in place since early May, the index needs to plunge below 38,000. In such a scenario, the index can decline and test supports at 37,500 and 37,000.

Conversely, an upward break above the resistance band of 40,000-40,200 will reinforce the up-trend and take the index northwards to 40,400 and 40,800 levels over the medium term. An inability to move beyond the upper-end can keep the index in a sideways consolidation phase in the wide 38,000-40,000 band.

Nifty Bank (31,105.2)

The Nifty Bank index advanced 476 points or 1.56 per cent last week. However, the index faces a key resistance at 31,500. A strong break above this barrier is needed to strengthen the bullish momentum and take the index higher to 31,700 and then to 32,000 in the short-term. The indicators and oscillators in the daily as well as weekly charts are showing mixed cues. A slump below the immediate key support at 30,500 can drag the index lower to 30,250 and 30,000 over the short term. A further fall below 29,500 levels can deteriorate the short-term up-trend and drag the index down to 29,000 in the medium term. As long as the index trades in the band between 30,500 and 31,500, traders with a short-term perspective should tread with caution and avoid taking fresh positions.



Global cues

After three weeks of rally, the Dow Jones Industrial Average took a breather and declined 119 points or 0.45 per cent to close at 26,599 levels last week. The index tests a support at 26,500. A fall below this level can pull it lower to 26,200 and 26,000 levels. Ensuing supports are at 25,500 and 25,000. But an upward reversal from the current support can take the index northwards to 26,500 and then to 27,000. An emphatic breakthrough of this barrier will strengthen the up-trend and take the index up to 27,500 and 28,000 over the medium term.

The Nikkei 225 index was choppy and almost closed flat at 21,275 levels. A key resistance is ahead at 21,500 and supports are at 21,000 and 20,500 levels. A strong break above 21,500 is needed to take the index northwards to 22,000 and 22,300.

Published on June 29, 2019
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