Near-term outlook bullish for Sensex, Nifty

The week just gone by was action-packed with the Sensex and the Nifty 50 scaling to record highs on the back of buying interest in large-cap stocks. Although the near-term bullish momentum is intact, selling pressure at higher level is possible due to profit booking. Last week, the RBI Monetary Policy Committee (MPC) kept the rates unchanged and retained its GDP growth projection at 9.5 per cent for FY22. It revised CPI inflation outlook for 2021-22 to 5.7 from 5.1 per cent.

On the global front, the US Consumer Price Index (CPI) inflation data and weekly jobless claims are key.

Nifty 50 (16,238.2)

The Nifty 50 jumped 475 points or 3 per cent in the past week, conclusively breaking above the key resistances at 15,900 and touched the 16,000-mark. This rally underpins the medium as well as long-term uptrends.

The week ahead : After almost two months of range-bound movement, the Nifty 50 index breached the upper boundary of the sideways consolidation phase. Since early June, the index was on a sideways consolidation phase broadly in the range between 15,500 and 15,900 until last week. The recent rally has altered the sideways trend for the index. It now trades well above the 21- and 50-day moving averages. The daily relative strength index has entered the bullish zone from the neutral region and the weekly RSI continues to feature in the bullish zone.

However, the index is paused at around 16,300, which now acts as a minor hurdle. An emphatic break above this resistance will reinforce the bullish momentum and take the index northwards to 16,500 in the ensuing weeks.

Having said that, a strong plunge below the key base in the band between 15,900 and 16,000 can alter the near-term uptrend and pull the index down to the next support in the 15,500-15,600 zone. A further fall below the significant support level of 15,500 can extend the down-move on the back of selling pressure and the index could test subsequent supports at 15,300 and 15,000 levels over the short term.

Medium-term outlook : Last week’s 3 per cent surge has strengthened the medium-term uptrend. As long as the index trades above the significant support level of 15,000, the medium-term uptrend that commenced from the April low at 14,151 will remain in place. A decisive fall below 15,000 can alter the uptrend and pull the index down to 14,800 initially and then to the next supports at 14,500 and 14,200. Supports thereafter are placed at 14,000 and in the 13,500-13,600 band.

In case a corrective decline occurs, the key medium-term supports placed at 15,500 and 15,000 can cushion the index. Only a strong decline below 15,000 will mar the medium-term uptrend and drag the index lower to 14,800 and then to 14,600 levels. A further fall below 14,600 will lead to testing the supports at 14,400 and 14,200 levels in the medium term. Vital supports below 14,000 are at 13,600 and 13,200 levels.

On the other hand, a decisive rally beyond 16,300 can pave the way for an up-move to 16,500 initially and then to 16,700 levels over the medium term. Thereafter 17,000 will be in the vicinity.

Sensex (54,277.72)

Last week, the Sensex jumped 1,690 points or 3.2 per cent, conclusively breaking above the vital barrier at 53,000, which will act as key support now. The index has scaled to record a new high at 54,717 in the past week and tests resistance at 54,500 levels. A conclusive break above this hurdle can take the index higher to 54,717 and then to 55,000 over the short term. On the other hand, a fall below the immediate base level of 54,000 can extend the near-term corrective decline to 53,500 levels. Supports thereafter are placed at 53,000 and 52,770. A slump below 52,770 will alter the near-term uptrend and pull the index lower to 52,500 and then to 52,370. Next key support is pegged at 52,000. A further fall below this base level will start threatening the uptrend and pull the index down to 51,400 and then to 51,000 levels over the medium term.

We reiterate that as long as the index trades above the 50,000-mark, the medium-term uptrend that started from the April low at around 47,204 will remain in place. Key supports below 50,000 are placed at 49,500 and 48,700 in the medium term. Investors with a long-term perspective can stay invested with a revised long-term stop-loss at 44,000.

Nifty Bank (35,809.25)

In the past week, Bank Nifty surged 1,224 points or 3.5 per cent and has breached key resistances at 35,000 and 35,500 levels. Nevertheless, the index now tests next vital resistance at 36,000. A conclusive breakthrough of this resistance can take the index northwards to 36,500 and then to 37,000 levels over the short term. The index trades well above the 21- and 50-day moving averages. The daily relative strength index is on the brink of entering the bullish zone from the neutral region and the weekly RSI is also likely to enter the bullish zone. Traders with a short-term perspective can take fresh long positions with a fixed stop-loss on strong rally above 36,000 levels.

Immediate supports are at 35,500 and 35,000 levels. A decisive fall below these supports will bring back selling pressure and pull the index down to 34,500 and then to 34,000 levels over the short to medium-term horizon. We reaffirm that a clear decline below 34,000 will alter the medium-term uptrend that started from the April low of 30,405 levels. In that scenario, the index can extend the down-move to 33,000 and then to 32,000 over the medium term.

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