Index Outlook: Can Sensex and Nifty 50 see a fresh rally?

A sign of relief for the global equity markets last week. Sensex, Nifty 50 and the Dow Jones Industrial Average witnessed a relief rally after having fallen for three consecutive weeks. Sensex and Nifty have closed higher by 1.33 and 1.29 per cent respectively. The Dow Jones, on the other hand, was up 2 per cent.

Both the Sensex and Nifty are poised relatively much better than the Dow Jones based on the charts. The Dow still has more room to fall from here, but the downside is likely to be limited for the Sensex and Nifty, going forward. The equity markets have broadly run into the “buy on dips phase now unless any new negative news comes out.

Among the sectoral indices, barring the FMCG, all others have closed in green last week. The BSE FMCG index was down 0.95 per cent. The BSE Metal index surged the most by 5.79 per cent. The BSE Capital Goods and the BSE Realty indices rose by 3.61 and 3.44 per cent respectively.

FPI action

After selling for two consecutive weeks, the Foreign Portfolio Investors (FPIs) had bought the Indian equities last week. The equity segment has seen an inflow of $299 million last week. The benchmark indices can get a boost if the FPIs accelerate their purchase.

Nifty 50 (17,314.65)

Nifty opened the week on a weak note and fell below 17,000 on Monday. However, the index took support from the 21-Week Moving Average (MA) and rose back sharply to make a high of 17,428.80 on Thursday. Nifty has come off from this high and closed the week at 17,314.65, up 1.29 per cent.

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Chart Source: MetaStock

The week ahead: The near-term bias is bullish. But intermediate dips are likely on the back of the weakness in the US markets.

Immediate support is at 17,180. Below that the 21-Week MA at 16,826 is the next important support which has been limiting the downside over the last two weeks. A break below 17,180 can take the Nifty down to 17,000 and 16,826 this week. But a further fall below 16,826 looks less likely because as seen from the weekly charts, Nifty is very well getting bought below 17,000.

Immediate resistance is at 17,465 – the 21-Day MA. A break above 17,465 can take the index up to 17,600 - a crucial short-term trendline resistance.

As long as the Nifty sustains above the 21-Week MA support, the bias is bullish. As such we can expect the Nifty to breach 17,600 if not immediately but eventually. Such a break will see the Nifty rallying to 18,000-18,100 in the short-term.

Medium-term outlook: Strong supports are at 16,600-16,500 and 16,200 for the Nifty. As long as the index stays above these supports, the medium-term outlook will remain bullish.

Crucial resistance to watch is at 18,100. We expect Nifty to breach this hurdle which in turn will boost the momentum. A break above 18,100 can take the Nifty up to 18,750 and 19,100 initially. A sustained break above 18,100 will have the potential to take the Nifty up to 20,500 in the coming months.

Only a monthly close below 16,500 will be a danger for the bullish outlook mentioned above. It will then increase the chances of breaking below 16,200. That in turn will turn the outlook bearish to see 15,000 and even lower levels. But such a fall looks less probable at the moment.

Sensex (58,191.29)

Sensex has risen back well last week. The index made a high of 58,578.76 and has come off slightly from there. It has closed the week at 58,191.29, up 1.33 per cent.

Chart Source: MetaStock

The week ahead: The short-term outlook is bullish. Supports are at 57,280 and 56,450. Immediate resistance is at 58,610. A break above it will take the Sensex up to 59,485. A further break above 59,485 will then pave way for an extended rise to 60,400-60,500 in the coming weeks.

This bullish outlook will get negated only if the Sensex breaks below 56,450. In that case, it can fall to 55,500-55,200.

Medium-term outlook: Important supports are at 55,500 and 54,200. As long as the Sensex trades above these supports the outlook is bullish. Resistance is at 60,400-60,500. A strong break above 60,500 will boost the bullish momentum. It will then take the Sensex up to 63,000 initially and even higher eventually in the coming months.

The bullish outlook will get negated only if Sensex falls below 54,200. That will turn the outlook bearish to see 50,000-49,000 on the downside.

Short-term outlook

Nifty is bullish for 18,100

Sensex is bullish to test 60,500

Dow Jones is bearish to see 28,500

Nifty Bank (39,178.05)

The Nifty Bank index has recovered well after having fallen over the past two weeks. The index has closed the week at 39,178.05, up 1.41 per cent.

The short-term picture is looking mixed. Resistance is at 39,800. A strong break above it is needed for the index to test 40,000 levels again. Supports are at 38,400 and 37,900.

Chart Source: MetaStock

Broadly, we can expect the Nifty Bank index to oscillate in a broad range of 37,000-40,000 for a few weeks. The bias is however bullish. From a long-term perspective, we see high chances for the Nifty Bank index to break 40,000. Such a break can take the index up to 42,000-43,000 initially. A further break above 43,000 will then pave way for a rally to 48,000-49,000 over the long term.

So, any fall to 38,000 or even 37,000 in the coming days should be considered as a good buying opportunity from a long-term perspective.

Global cues

The Dow Jones Industrial Average (29,296.79) witnessed a relief rally last week. The index rose breaking above 30,000. But the strong jobs data release on Friday played a spoil sport and dragged the Dow sharply lower. Although the index has closed 2 per cent higher for the week, the strong pull-back on Friday can keep it under pressure.

Chart Source: MetaStock

Resistance is at 29,700-29,800. As long as the Dow Jones trades below this resistance zone, the outlook is bearish to see a fall to 28,500-28,400 in the near term. A break below 28,400 can see an extended fall to 27,500 and even 27,000.

However, we reiterate that the 28,500-27,000 is the broad support zone where the Dow Jones can find a bottom. As such, the fall to this support zone will be a good buying opportunity from a long-term perspective.

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