Index Outlook: All eyes on the RBI

The key bellwether indices — the Sensex and the Nifty — started the prior week on a sober note but rallied subsequently, triggered by buying interest in banking stocks and short-covering in the expiry week. But the key indices may face hurdles ahead, testing crucial resistances. Also, profit-booking can be seen at higher levels. The RBI's monetary policy scheduled this week will be keenly watched and will lend direction to the market. Auto sales number for March and the rupee movement also need to be noted.

On the global front, February US retail sales data, US durable goods orders and the March jobs report are key data points to watch in the coming week, apart from the US PMI. The WTI crude oil price hovering at $60 a barrel also needs a close watch.

Nifty 50 (11,623.9)

The Nifty index advanced 167 points or 1.46 per cent last week amid choppiness. The index declined initially to 11,311 and subsequently moved up and has managed to close above the significant resistance in the band between 11,500 and 11,550.

To reinforce the bullish momentum, a strong close above this band is required. In such a scenario, the index can trend northwards to 11,750 and then to 11,800 levels in the near term. Next key resistances for the index are at 11,900 and 12,000 levels. But a slump below 11,500 will negate the recent break-out and drag the index down to 11,300 levels once again.

A conclusive fall below the key immediate support at 11,300 can pull the index lower to 11,100 and 11,000 levels in the short term. Although the index trades way above its 50- and 200-day moving averages, it could face resistance at around 11,750 levels. The indicators such as relative strength index and price rate of change in the daily chart have started displaying negative divergence.

But only a strong plunge below 11,000 will mar the short-term uptrend and drag the index down to 10,800 levels. Next key support is at 10,600. A further fall below 10,600 can bring back the selling pressure and pull the index lower to 10,500 and 10,400 levels.

Medium-term trend: The Nifty index has been in a medium-term uptrend since finding support at around 11,000 in October 2018. The medium-term uptrend will stay in place as long as the index hovers above the vital trend-deciding support level of 10,600.

But a decisive fall below 10,600 will mitigate the medium-term uptrend and pull the index lower to 10,400 and 10,000 levels in the medium term. If the index manages to sustain above 11,500, it can trend upwards to the next key resistance at 11,750 and 11,800 levels in the medium term. Immediate medium-term supports for the index are at 11,000 and 10,800 levels.

Sensex (38,672.9)

The Sensex resumed its uptrend by advancing 508 points or 1.33 per cent in the previous week. The index now faces a significant resistance ahead at 38,800-39,000 band.

An emphatic breakthrough of this barrier will take it higher to 39,400 and 39,800 levels over the medium term. That said, a downward reversal from the current resistance zone can drag the index down to 38,200 and 37,800 in the short term.

A strong plunge below 37,800 can pull the Sensex lower to 37,500 and 37,000. We reiterate that a conclusive fall below 36,500 is required to alter the short-term downtrend and drag the index down to 36,400 and 36,200 levels. To change the medium-term uptrend, a decisive decline below 35,800 is required. Investors with a medium-term horizon can remain invested with a revised stop-loss at 36,400 levels.

Nifty Bank (30,426.8)

Following a minor pause at around 29,500, the Nifty Bank index extended the rally last week by gaining 844 points or 2.85 per cent. But the index tests a key resistance at 30,500.

The daily relative strength index and price rate of change indicators show negative divergence and feature in the overbought territory, implying a near-term correction. The weekly counter parts of these indicators also hover in the overbought territory.

An accelerated up-move beyond 30,500 will be short-lived and encounter resistance at 31,000. Subsequent key resistances could be at 31,500 and 32,000 levels.

But a downward reversal from the current levels can drag the index down to 30,000 in the near term. A strong tumble below 30,000 can bring back selling pressure and drag the index down to 29,500 levels. Next key supports are placed at 29,000 and 28,500 levels. An emphatic plunge below 28,500 will alter the short-term uptrend and pull the index lower to 28,000 and 27,500 levels. Traders with a short-term perspective should tread with caution while maintaining a fixed stop-loss.

Global cues

Last week, the Dow Jones Industrial Average bounced back gaining 426 points or 1.67 per cent to 25,928 levels. The index now faces key resistance ahead at 26,000.

Only a strong break above this level will strengthen the bullish momentum and take the index higher 26,300 and 26,500 levels in the short to medium term. But failure to move beyond 26,000 can keep the index range-bound between 25,500 and 26,000 for a while. A decisive fall below 25,500 can drag the index down to the next support level of 25,200 and 25,000.

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