The Sensex and the Nifty began the truncated week on a negative note and remained volatile during the expiry of the June derivative contracts.

Crude oil jumped 7 per cent in the previous week to close at $46 a barrel. Further rally in oil prices could trigger weakness in the global markets. On the other hand, the rupee fell against the US dollar last week; further weakening can exert more pressure on domestic equity markets.

The Goods and Services Tax has become a reality. However, the impact on companies’ revenue and profitability will be known in the coming months. We also reiterate that if profit booking kicks-in globally, as the US markets are overheated, domestic indices can extend the correction. Investors can follow the progress of the monsoon, rupee movement and foreign inflows.

Nifty 50 (9,520.9)

The index ended the truncated week on a negative note by slipping 54 points or 0.56.

Short-term trend: The Nifty tests a key support at 9,500 where the 50-day moving average is also poised. The near-term trend for the index is ambivalent. The index tests the vital support at 9,500, which needs to be closely watched in the coming week. An emphatic downward break of the base at 9,500 can pull the index down and the shallow corrections can extend to 9,400 levels or even to short-term support level of 9,328.

Short-term traders should tread with caution and desist from taking fresh long positions on a decisive fall below 9,500 levels. Last week, even short-covering failed to take the index higher. Any intra-week rally can limit the index at 9,600 levels which is a key resistance for now. Conclusive break above 9,600 can push the index higher to 9,700 levels once again, but for this to happen, the market needs strong triggers. Further rally above 9,700 can take the index northwards to 9,844, 9,939 or 10,000 in the short to medium term.

That said, a decisive plunge below the immediate significant support level of 9,328, can alter the short-term trend down. Key support below this level is pegged at 9,200 and 9,100 levels.

Medium-term trend: As long as the index trades above 9,100 levels, the medium-term trend will be up. Resumption of the uptrend can push the index northwards to the medium-term targets of 10,626 and 12,077. Strong break above 9,700 can take the index to the psychological level of 10,000. Key medium-term supports to note are placed at 9,000, 8,800 and 8,600.

Nifty Bank (23,211.2)

Last week, the Bank Nifty plummeted 331 points or 1.4 per cent, breaching a key immediate support level of 23,500. The index appears to have reversed direction from a near-term perspective, triggered by negative divergence in the daily relative strength index and price rate of change indicator. Since recording new of 23,897.8 on June 22, the index has been on a near-term downtrend. While trending down, it has decisively breached its 21-day moving average and key base at 23,500 recently.

Nevertheless, the index now tests next support at 23,000 as well as its 50-day moving average poised at this level. Traders should avoid taking fresh long positions at this juncture. They can consider booking partial profits if the index conclusively breaks below 23,000 levels. Such a fall can pull the index down to 22,500 with a minor pause at 22,700 levels.

An upward reversal from 23,000 can encounter resistance at 23,500 which needs to be surpassed to strengthen the medium-term uptrend. The index can move upwards to 23,740 and then to 24,000 levels in the medium-term. Strong break above 24,000 can push the index northwards to 24,500 and 25,000 in the long run.

Sensex (30,921.6)

With the Sensex declining 216 points or 0.7 per cent in the previous week, the short-term uptrend is losing its bullish momentum. The index is likely to test the immediate key support level of 30,600; a decisive fall below this level can alter the short-term trend downwards. Next supports are pegged at 30,300 and 30,000 levels.

A vital medium-term support is placed at 29,250. On the upside, the index has to move beyond its 21-day moving average and a key hurdle at 31,200. Then, the index can revisit the recent peak at around 31,500. Further climb can take the index to 32,000 and 32,335 levels over the medium term.

Global cues

The Dow Jones Industrial Average is volatile, testing the key resistance at 21,500. It ended on negative note by declining 45 points to close at 21,349. A slump below 21,200 can pull the index down to 21,000. Key resistances are at 21,400 and 21,500. Nasdaq Composite index has plunged 2 per cent to 6,140.4 last week. It tests support at 6,100. Strong fall below this level can pull it down to 6,000. Resistances to note are at 6,200 and 6,300.

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