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After factoring in the Assembly election results, markets will keenly await the outcome of the US Fed meeting.
The Fed is scheduled to meet this week with most market participants expecting the central bank to tighten US monetary policy, which could impact emerging markets.
Nifty 50 (8,934.5) The Nifty 50 index was choppy yet again and hovered below the key psychological resistance level of 9,000 in the previous week. It added 37 points or 0.4 per cent.
This week: After an initial rally last Monday, which mitigated implications of bearish engulfing pattern, the index turned volatile and subsequently started to trade range-bound between 8,880 and 9,000. However, other parameters such as the indicators in the daily chart displaying signs of weakness and showing negative divergence and decreasing volume over the past two weeks, imply a near-term bearish bias. Having said that, the uptrend in the index that began in late December is still intact. The index trades well above its 50 and 200-day moving averages, and the cross-over of these averages is a positive sign. But the index continues to face a key psychological resistance ahead at 9,000.
As the index has been trading in a narrow range over the past two weeks, any trigger can set the direction for the next move.
Positive Assembly election results, which were out recently, could trigger a break above the key resistance level of 9,000. An upward break could reinforce the medium-term uptrend and push the index higher to 9,119 or 9,172 in the short term.
Nevertheless, the Fed outcome can trigger a downward break-out of the sideways range. Plunge below the immediate support level of 8,880 and 8,800 can bring back bearish momentum and pull the index down to 8,725 and then to 8,600 in the coming weeks.
Therefore, traders with a near-term perspective should take cues from the Fed outcome and trade accordingly.
Medium-term trend: There is no major change in the medium-term outlook as of now. But it is a crucial week ahead for the medium-term trend. The index has been on a medium-term uptrend since last December low of around 7,900.
Nonetheless, the index faces a key long-term resistance ahead at 9,000. Strong break above this barrier can take it northwards to 9,119 and 9,200 levels in the medium term.
We reiterate that the medium-term uptrend will be intact as long as the index trades above the key level of 8,450. Next supports are at 8,350 and 8,250.
Sensex (28,946.2) Last week, the Sensex advanced marginally by gaining 113 points or 0.4 per cent.
The index continues to test the significant resistance level at 29,000. The indicators and oscillators in the daily chart show weakness. Any near-term corrective decline in the index can find supports initially at 28,750 and then at 28,500.
Strong tumble below 28,500 can strengthen the bearish momentum and pull the index down to 28,300 and then to 28,000 in the short term.
Key supports below 28,000 are at 27,500 and 27,300 levels. Conversely, if the index decisively breaks above 29,000, it will bring back bullish momentum and take the index upwards to 29,500 or even to 30,000 in the medium term. To alter the medium-term uptrend, the index needs to decline below the key medium-term support level of 27,000. Subsequent supports are placed at 26,700 and 26,500.
Bank Nifty (20,727.5) Last week, the Bank Nifty managed to stay above key support level of 20,500 without giving any opportunity to go short.
Over the past three weeks, the index has been on a sideways consolidation phase in the band between 20,500 and 21,000. Amid volatility, the index advanced 231 points or 1.1 per cent in the previous week.
The indicators in the daily chart continue to show weakness.
Traders with a short-term perspective should tread with caution as long as the index trades in the aforementioned sideways range.
Strong rally beyond 21,000 is required to strengthen the uptrend and take the index higher to 21,500 levels.
On the other hand, a decisive plunge below the immediate support level of 20,500 could reinforce the downtrend and drag the Bank Nifty lower to 20,370 initially, and then to 20,150 or 20,000 in the short term.
The index has been on a medium-term uptrend from last December low of 17,606. This uptrend will remain in place as long as the index trades above 19,000 levels.
A conclusive fall below 20,000 will mar the near-term uptrend. The index can then test the supports at 19,700 and 19,500.
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