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It was a volatile week for the Indian equity markets. The Indian benchmark indices opened with a wide gap-down on Monday. Sensex and Nifty tumbled over 3 per cent initially last week. The news on Russia launching its second phase of attack on Ukraine jolted the markets. It triggered sharp sell-off in the final trading hours of Tuesday. Though the indices had managed to bounce back thereafter, they seem to lack strong follow-through buyers. It is evident from the pull back seen on Friday. This continues to keep the broader picture weak. As such we can expect a fresh fall in the Sensex and Nifty in the coming weeks.
The sectoral indices were mixed. A few closed in green and many had closed in red. The BSE Auto Index outperformed others by rising 2.86 per cent. This was followed by the BSE Oil & Gas index, which was up 1.49 per cent. The BSE IT index, down 5.5 per cent, was beaten down the most.
FPI sell-off intensifies
The Foreign Portfolio Investors (FPIs) had dumped the Indian equities last week. The equity segment has seen an outflow of $2.03 billion last week. Thus, the FPI has turned net sellers of Indian equities for this month also. For April, their net selling in India equities stands at $1.31 billion. As long as the FPIs continue to sell, both the Sensex and Nifty will remain under pressure to fall further.
Nifty 50 (17,171.95)
Nifty broke below the psychological 17,000-mark on Tuesday and tumbled to a low of 16,824.7. The strong bounce-back move witnessed thereafter failed to get a strong follow-through rise past 17,400. The index has come off from the high of 17,414.7 to close the week 1.74 per cent down at 17,171.95.
The week ahead: The turn around last week has happened from just below the 21-Day Moving Average (DMA) resistance. This is currently at 17,455, which will be an important resistance for the week. Below this, there is another resistance at 17,235.
As long as the Nifty trades below these resistances, the chances are high for it to break below 17,000 again. Such a break can drag it to 16,725 – an important support for this week. The chances are high for the Nifty to break below 16,725 and extend the fall to 16,500 in the short term.
In case the index manages to bounce from 16,725, a rise to 17,400-17,500 is possible.
Trading strategy: Go short at current levels and accumulate shorts at 17,420. Keep the stop-loss at 17,520. Trail the stop-loss down to 17,040 as soon as the index falls to 16,930. Move the stop-loss further down to 16,830 as soon as the index touches 16,780 on the downside. Exit the shorts at 16,760.
Medium-term outlook: The break below 17,400 happened last week as expected. This keeps the broader bearish view intact. As mentioned above, the chances are high for the Nifty to break 16,725. Such a break will trigger a steeper fall towards 15,000 in the coming months.
From a long-term perspective, the fall now to 15,000-14,500 will be a good buying opportunity.
Trading strategy: The trailing stop-loss at 17,380 has been hit on the short positions taken at 17,475. Positional traders can go short again at the current levels. Keep the stop-loss at 18,220. Trail the stop-loss down to 16,900 as soon as the index falls to 16,450. Move the stop-loss further down to 16,100 as soon as the index touches 15,600 on the downside. Book profits at 15,100.
Sensex (57,197.15)
Sensex tumbled over 3 per cent in the first half of the week to test a low of 56,014.98. However, it managed to recover some of the loss thereafter. The index has closed the week at 57,197.15, down 1.96 per cent.
The week ahead: The near-term outlook is negative. Immediate resistance is at 57,900 and the next one is at 58,350. As long as the Sensex trades below these resistances, the chances are high for it to test 56,000 again this week. A further break below 56,000 can drag it to 55,200-55,000 thereafter.
Sensex will have to breach 58,350 in order to turn the outlook positive. That will then take the index up to 59,500-60,000 in the short term. But such a rise breaking above 58,350 looks less probable.
Medium-term outlook: The overall bearish view remains intact; 56,000 will be a crucial support to watch. A strong break below it will pave way for our medium-term target levels of 52,000-51,500 initially and then to 50,000 eventually. Such a fall to 50,000 will be a good buying opportunity from a long-term perspective.
Nifty Bank (36,044.75)
After opening the week with a wide gap-down at 36,833, the Nifty Bank index was broadly range-bound. The index oscillated between 36,000 and 37,000 all through the week. It has closed the week just above the lower end of that range at 36,044.75, down 3.8 per cent for the week.
The bias remains negative to break below 36,000 in the near term. Supports below 36,000 are at 35,500 and 35,350. A strong break below 35,350 will increase the downside pressure. Such a break will then pave the way for a fresh fall to 34,500 and 34,000 in the coming weeks. The price action around 34,000 will need a close watch to see if the index is managing to bounce back or not.
Cluster of resistances are poised in between 36,700 and 37,000. The Nifty Bank index will have to break above 37,000 decisively to ease the downside pressure and go back up to 38,000 and higher levels.
Trading strategy: Positional traders can go short at current levels. Accumulate shorts on a rise at 36,660. Keep the stop-loss at 37,350. Trail the stop-loss down to 35,800 as soon as the index falls to 35,400. Move the stop-loss further down to 35,200 as soon as the index touches 34,800. Book profits at 34,600.
Global cues
The Dow Jones Industrial Average (33,811.4) witnessed a strong rise in the first half of the week breaking above 35,000. But the index ran into a heavy sell-off in the last two trading days of the week. The index tumbled from the high of 35,492.22 to close the week at 33,811.4, down 1.86 per cent.
Support is at 33,400, which can be tested this week. The bias is bearish. As such the index can break the support at 33,400 and fall to 33,000-32,700 in the coming weeks.
Resistances are at 33,950 and 34,300. The Dow will have to break above 34,300 decisively to bring back the chances of seeing 35,000 on the upside again.
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