Nifty 50, Sensex and the Nifty Bank index sustained well above their support and has risen sharply last week. Nifty Bank index has seen the much-expected bullish breakout last week. However, this breakout is yet to happen on the Nifty and Sensex.
The trigger for the breakout in the Nifty Bank index came from the Reserve Bank of India’s (RBI) monetary policy announcement on Friday. The RBI cut the repo rate by 50 basis points and the cash reserve ratio (CRR) by 100 basis points.
Overall, our broader bullish view is intact. The breakout in the Nifty Bank index has opened the doors for more rise. We expect the Nifty and Sensex to breakout this week and rise alongside the Nifty Bank index.
Among the sectors, the BSE Realty index got a boost on Friday after RBI’s sharp rate cuts. The index surged the most last week and was up 9.65 per cent.
FPIs sell
Foreign Portfolio Investors (FPIs) began the month of June on a negative note. They sold about $1.02 billion in the equity segment in the first week of the month. However, this has not impacted the benchmark indices much last week. We will have to wait and see the FPIs’ action going forward.
Nifty 50 (25,003.05)
Nifty fell initially last week but then recovered very well in the second half. The index touched a low of 24,502.15 on Tuesday and then rose back to close the week at 25,003.05, up 1.02 per cent.
Short-term view: Nifty has been range-bound between 24,350 and 25,100 over the last few weeks. The bias is bullish. We expect the Nifty to breach 25,100 and rise to 25,600-25,800 initially, and then 26,000 eventually in the short term.
If Nifty fails to breach 25,100, it can fall back to 24,800 or 24,600. Thereafter it can rise back again.
Medium-term view: The broader picture remains bullish. Nifty can rise to 28,000-28,500 over the medium term. Also, from a long-term perspective we expect the Nifty to target 31,000. However, there could be an intermediate correction, possibly from the 28,000-28,500 region before the index targets 31,000.
Immediate support is in the 24,500-24,000 region. We expect the Nifty to sustain above 24,000 going forward.
Nifty Bank (56,578.40)
The much-awaited breakout above 56,100 happened last week. The Nifty Bank index surged on Friday breaking above this hurdle and closed on a strong note at 56,578.40, up 1.49 per cent.
Short-term view: The outlook is bullish. Nifty Bank index can rise to 58,000 and even 59,000. There is no major resistance visible ahead of the aforementioned levels.
Immediate support is at 55,900. Below that, 55,400-55,300 is a very strong support zone. A fall below 55,300 is needed to turn the short-term outlook negative to see 54,500 on the downside. But such fall looks unlikely. We can expect the Nifty Bank index to sustain above 55,900 itself.
Medium-term view: The breakout last week keeps intact our broader bullish view of seeing 61,000 on the upside. However, we reiterate that there is a possibility of seeing a corrective fall from the 58,000-59,000 region towards 56,000. Thereafter a fresh leg of rally can take the Nifty Bank index up to 61,000 eventually.
Important supports are at 54,000 and 52,500.
Sensex (82,188.99)
Sensex broke below 81,000 initially last week but found support around 80,500. The index rose back well from the low of 80,575 recovering all the loss. It closed the week at 82,188.99, up 0.91 per cent.
Short-term view: The outlook is bullish. Sensex can rise to test its 82,500-83,000 resistance zone. We expect the Sensex to breach 83,000 and rise to 84,500 and higher in the short term.
Failure to breach 83,000 can drag the index down to 82,000 or even 81,000 again. In that case, the 80,500-83,000 range can continue to remain intact for some more time.
Medium-term view: The outlook is bullish to see 86,000 in the coming months. Strong support is in the 80,000-79,000 region which is likely to limit the downside going forward.
From a long-term perspective, there are good chances for the Sensex to target 90,000-92,000 on the upside.
US market outlook
The US benchmark indices have risen well for the second consecutive week. The Dow Jones Industrial Average and the S&P 500 index were up 1.17 per cent and 1.5 per cent respectively. The NASDAQ Composite closed over 2 per cent for the second consecutive week and outperformed last week. The index was up 2.18 per cent.
Overall, the picture on the chart continues to remain bullish for the US benchmark indices. We can expect them to move higher going forward.
Dow Jones (42,762.87)
The Dow Jones is stuck between 41,350 and 43,000 over the last few weeks. But the bias is bullish. So, we expect it to breach 43,000 in the coming days. Such a break will also confirm the inverted head and shoulder bullish pattern on the chart. It will then boost the bullish momentum and take the Dow Jones up to 44,000 initially, and then 45,000-46,000 eventually in the coming weeks.
Near-term supports are at 42,200 and 41,800. These supports can limit the downside if the Dow fails to breach 43,000 and reverses lower.
The index has to decline below 41,800 to turn the short-term outlook negative for a fall to 41,200-41,000.
S&P 500 (6,000.36)
The S&P 500 index has risen breaking above 5,970 as expected. That keeps intact our bullish view of seeing the rise to 6,200. An extended upmove even up to 6,300 cannot be ruled out.
Supports are at 5,940 and 5,890 which can limit the downside. The index has to break 5,890 to come under pressure for a fall to 5,800. But that looks less likely.
NASDAQ Composite (19,529.95)
NASDAQ Composite index has risen well breaking above the resistance at 19,450. That keeps intact our overall bullish view. The index can rise to 20,000-20,100 from here. Supports are at 19,200 and 18,900.
