The rally in the Indian benchmark indices lost steam last week. Both the Sensex and Nifty 50 struggled to gather momentum and move up since the beginning of the week. Weakness in the global equities kept the indices pressured on the downside all through the week.

While the other major global indices like the Dow Jones Industrial Average, Nikkei 225, etc, had already turned down from their peaks a few weeks ago, India’s Sensex and Nifty are yet to show any sign of a reversal. It will have to be seen how long the Indian benchmark indices can remain insulated from the sell-off seen in the global markets. As such, we continue to remain cautious at these levels and not very bullish.

Nifty 50 (17,532.05)

Nifty 50 opened the week on a positive note with a gap-up. But the index failed to sustain higher and fell all through the week after making a high of 17,943.5 on Monday. The index fell to a low of 17,452.9 on Friday before closing at 17,532.05, down 1.8 per cent for the week.

The week ahead: Immediate support is at 17,400. A break below it can drag the Nifty down to the next crucial support at 17,250. However, a strong follow-through sell-off below 17,250 is needed to signal a short-term reversal. Such a fall can take the Nifty down to 17,000 and 16,800. A bounce from 17,400 itself or from 17,250 can take the index up to 17,800-17,900 again. Overall, the index is range-bound between 17,250 and 17,950 for now. A breakout on either side of this range will determine the next direction of move.

Medium-term outlook: The medium-term trend is up. Strong supports are at 16,600 and 16,300, which can be tested if the Nifty breaks below 16,800. However, the outlook will turn bearish only on a decisive break below 16,300. Such a break can drag Nifty to 15,950 and 15,900 over the medium term. As mentioned last week, the chances of the fall extending even up to 15,000 cannot be ruled out.

But as long as the index stays above 16,600-16,300 the trend will remain up and a test of 19,600-19,800 is possible over the medium term.

Sensex (58,765.58)

Sensex failed to sustain above the psychological level of 60,000 last week. Though the index rose to a high of 60,412.32 on Monday, it reversed sharply lower, breaking below the key near-term support level of 59,000. Sensex made a low of 58,551.14 on Friday before closing at 58,765.58, down 2.14 per cent. On the charts, the Sensex looks relatively much weaker than the Nifty 50. It will be interesting to see if the weakness in Sensex will drag the Nifty lower along with it or the relatively stable Nifty will keep the Sensex afloat.

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The week ahead: The near-term outlook is negative. Resistances are now at 59,000 and 59,500. As long as the index stays below 58,500, the chances are high to see a dip to 58,000-57,900 this week. A break below 57,900 can see an extended fall to 57,650. Such a fall will indicate a top in place. On the upside, 59,500 is an important resistance. Sensex has to rise past 59,500 and back to 60,000-60,500 again, to ease the downside pressure

Medium-term outlook: As mentioned above, a fall to 57,650 will indicate a top in place. It will also signal the beginning of a corrective fall within the medium-term uptrend. In such a scenario, Sensex can fall to 56,000-55,000. The level of 55,000 is a strong medium-term trend support which can halt this corrective fall. A fresh rise from near 55,000 will indicate that the broader uptrend is intact and can target 66,000-67,000 over the medium term.

As mentioned last week, the medium-term uptrend will come under pressure only if Sensex breaks below 55,000. Such a break can drag the Sensex lower to 54,200-54,000 and even 52,000 thereafter.

Nifty Bank (37,225.9)

The Nifty Bank index failed to get a strong follow-through rise above 38,000 last week. The index fell sharply from the high of 38,377, giving back all the gains. It has closed at 37,225.9, down 1.62 per cent for the week. The near-term outlook is mixed. Immediate support is at 36,800. A bounce from this support can see 38,000-38,500 on the upside again. But a break below 36,800 can drag it to the important support level of 36,000. A break below 36,000 will indicate a trend reversal and drag it to 34,000. The index has to sustain above 36,000 to keep the broader uptrend intact and move to 39,000-39,500 that we have been indicating in this column.

Traders who have taken long positions last week at 37,200 can accumulate at 36,500. Keep the stop-loss at 35,900 for the target of 39,200. Trail the stop-loss up to 37,650 as soon as the index moves up to 37,950.

Global cues

Global equities witnessed a strong sell-off last week. The Dow Jones Industrial Average (34,326.46) tumbled 2.91 per cent intra-week to make a low of 33,785.54 on Friday. However, the index managed to recover sharply from this low and close the week at 34,326.46, down 1.36 per cent for the week. Germany's DAX (15,156.44) fell 2.42 per cent last week. In Asia, Japan’s Nikkei 225 (28,771.07) tumbled by 4.89 per cent and China's Shanghai Composite Index (3,568.17) fell by 1.24 per cent for the week.

Though the Dow has bounced back well from Friday's low, the overall bias remains negative. However, a sideways consolidation between 33,500 and 35,000 is possible for a week or two. As long as the Dow remains below 35,000, the chances are high for it to break 33,500 and fall to 33,000 and 32,000 over the medium term. The Dow will need a strong and sustained break above 35,000 to bring back the bullishness and negate the fall to 33,000-32,000.