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Nifty 50 and Sensex have risen well for the third consecutive week. The benchmark indices has breached their key resistances and have closed on a strong note. We had expected the resistances to hold and the indices to see a fresh fall. That bearish view has gone wrong.
The Nifty Bank index, on the other hand, failed to sustain the break. The index declined sharply towards the end of the week giving back all its gains. Nifty Bank index is looking weaker than the Sensex and Nifty.
We may have to wait and watch the price action for a couple of weeks to get clarity on the direction of move.
Among the sectors, the BSE IT index outperformed last week by surging 5 per cent. The BSE Realty index was up 4.76 per cent. The BSE Bankex, down 0.83 per cent, was the only sector that closed in red last week.
Watch the FPIs
After selling Indian equities for 10 consecutive weeks, the foreign portfolio investors turned net buyers last week. They bought $869 million in the equity segment. So the FPI action in the coming weeks will need a close watch. If they continue to buy the Indian equities, then that can support the Sensex and Nifty 50 to move further higher from here.
Nifty 50 (19,731.80)
Contrary to our expectation, Nifty has risen well breaking the resistance at 19,550. Thus, our bearish view of seeing a fall back to 19,300 and lower levels has gone wrong. Nifty touched a high of 19,875.25 before closing the week at 19,731.80 on Friday. The index was up 1.58 per cent for the week.
Short-term view: The decisive break above 19,550 has turned the outlook bullish. However, the price action on the daily chart indicates lack of strength to get a sustained rise above 19,800-19,850. This keeps the chances alive of testing 19,500 once again. The region between 19,500 and 19,450 is a strong support zone. As long as the Nifty stays above this support zone, the chances are high for it to breach 19,850 decisively. That can take the index up to 20,000-20,050 in a week or two. A further break above 20,050 will then see the Nifty targeting 20,300-20,500, thereafter, in the short term.
Nifty will come under pressure only if it breaks below 19,450. Such a break can drag it down to 19,100-19,000.
Broadly, we expect a range of 19,450-20,050 for the next few weeks. A breakout on either side of this range will then set the trend going froward.
Chart Source: MetaStock
Medium-term view: Earlier, we were expecting 19,000-20,400 to be the trading range. Looking at the price action since last month, it seems the range could be much wider. 18,800-20,450 could be the revised trading range. Within this, 18,800-19,950 can be a narrow range that is in play as of now. So, a breakout on either side of this 18,800-19,950 range will determine the next move.
A break below 18,800 can drag the Nifty down to 18,200-18,000. Such a fall will be a very good buying opportunity from a long-term perspective. On the other hand, a break above 19,950 can take the index up to 20,450 – the upper end of the broader range.
Nifty Bank (43,583.95)
Nifty Bank index broke above the resistance at 44,000, but did not sustain. The index made a high of 44,420.95 and fell in the second half of the week giving back all the gains. Nifty Bank index closed at 43,583.95, down 0.54 per cent for the week.
Short-term view: The immediate outlook is unclear. 43,900-44,000 will be an immediate resistance. As long as the index stays below 44,000, it can fall to 43,000 initially and may be to 42,650 this week eventually. A further break below 42,650 can drag the index down to 42,000.
On the other hand, a rise to 44,500 is possible if a decisive break above 44,000 is seen. To turn the outlook convincingly bullish, the Nifty Bank index has to rise past 44,500, in which case a rise to 45,000 and higher levels will come back into the picture. It is a wait-and-watch situation for now.
Chart Source: MetaStock
Medium-term view: Failure to sustain the break above 44,000 keeps the double-top pattern still valid. So, if the above-mentioned fall to 43,000-42,650 happens this week, then the broader bias could remain negative. So, in that case, the Nifty Bank index will remain vulnerable to break 42,000 and fall to 41,000-40,000 over the medium term.
To negate the fall below 42,000, Nifty Bank index has to surpass 45,000. That looks less likely at the moment.
Sensex (65,794.73)
Sensex has risen above the resistance at 65,600. The index made a high of 66,358.37 and has come-off from there. It has closed the week at 65,794.73, up 1.37 per cent.
Short-term view: The immediate outlook is mixed. Resistance is at 66,600. A strong break above it can take the Sensex up to 68,000 this week. Failure to rise back above 66,000 from here can drag the index down to 65,000-64,800 or 64,700.
Broadly, 64,700-66,600 or 64,700-68,000 can be the trading range for a few weeks.
Chart Source: MetaStock
Medium-term view: The level of 64,700 is a crucial support. Sensex will come under pressure for a fall to 63,000-62,500 if it declines below this support.
Broadly, 62,500-68,000 can be the wide trading range for some time. We will have to wait for a breakout on either side of this broad range to get clarity on the next leg of move.
Dow Jones (34,947.28)
The rise to 35,000 happened in line with our expectation last week. The Dow Jones Industrial Average made a high of 35,051 on Wednesday and then remained stable for the rest of the week. It has closed at 34,947.28, up 1.94 per cent for the week.
Chart Source: MetaStock
Outlook: The outlook is bullish. There is room to test 35,500 and 35,750 – the next important resistances to watch. Whether the Dow manages to breach these resistances or not will decide the next move.
A decisive break above 35,750 will be bullish to see 36,300-36,500 on the upside. But a reversal from the 35,500-35,750 region will be bearish for a fall to 34,500 and even lower. As such, the price action in the 35,500-35,750 region will need a close watch this week.
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