Nifty 50 and Sensex have seen some relief last week. After falling for three consecutive weeks, the benchmark indices have seen a strong bounce. Sensex and Nifty rose about 2.5 per cent each. The sectoral indices also performed well last week. Barring the BSE Power and BSE Oil & Gas indices, others closed in green. The BSE Bankex outperformed by surging 3 per cent.

The price action on the charts indicates a kind of a base formation on the Sensex and Nifty. So, the rise seen last week could well be the beginning of a new leg of upmove. However, strong and cluster of resistances are ahead for the indices that can cap the upside. So, to gauge and confirm whether this is just a corrective bounce or a trend reversal, we will have to wait and watch.

The coming week is a truncated one. We have just three trading days. Markets are closed on Tuesday and Friday on account of public holidays. It is going to be very important to see how the equities close for the coming week. That would set the tone for the rest of the month.

FPI flows

The Foreign Portfolio Investors (FPIs) were net buyers of Indian equities. The equity segment saw a marginal net inflow of $85 million. The daily flow into equities last week indicates buying at lower levels. So, if the quantum of inflow increases in the coming weeks, then that would be very positive for the equity markets.

Nifty 50 (17,359.75)

The fall to 16,800 did not happen last week. Nifty managed to sustain well above 16,900 and has risen past 17,200. It made a high of 17,381.60 on Friday before closing the week up by 2.45 per cent at 17,359.75.

The week ahead: The near-term outlook is positive. Supports are at 17,200 and 17,100. Immediate resistance is at 17,400. A break above it can take the Nifty up to 17,500 or 17,650 initially. A further break above 17,650 will see the upside extending up to 17,780-17,800 in the short term.

The index will come under pressure only if it breaks below 17,100. In that case a revisit of 16,800 – the important short-term support is possible.

Broadly, we expect 17,100-17,800 to be the wider trading range for the next couple of weeks. Within this, the bias is positive to move up within it first.

Graph Source: MetaStock

Graph Source: MetaStock

Medium-term outlook: The bounce last week is a sign of relief. This indicates that the 16,800-16,700 support has held very well. However, the trend is still down; 17,800-18,000 is a crucial resistance. Nifty has to see a decisive weekly close above 18,000 to strengthen the bullish case. Only then, the chances of a rise to 19,000 and even 20,000 that we were expecting earlier will come back into the picture.

Having said that, Nifty will come under more pressure only if it breaks below 16,700. In such a scenario, a steeper fall to 16,300-16,000 cannot be avoided. However, as mentioned last week, if that fall happens, then that is going to be a good buying opportunity.

Sensex (58,991.52)

The support at 57,300-57,000 mentioned last week has held well. Sensex made a low of 57,415.02 and has risen back sharply to close the week on a strong note. The index has come-off slightly from the high of 59,068.47 to close the week up by 2.55 per cent at 58,991.52.

The week ahead: Immediate resistance is at 59,000. A break above it can take the Sensex up to 59,700. A further break above 59,700 will pave way for an extended rise to 60,400.

Immediate support is at 58,400. Below that, 57,980 and 57,400 are the next important supports. The short-term outlook will turn negative only if Sensex declines below 57,400. Such a break can drag it to 57,000-56,950.

We expect the Sensex to sustain above 58,400 this week and rise to 59,700 or 60,400 over the next couple of weeks

Graph Source: MetaStock

Graph Source: MetaStock

Medium-term outlook: The crucial support level of 57,000 has held very well and there is a sign of relief. However, strong resistance is in the 61,000-61,500 region. Sensex has to rise past 61,500 to become convincingly bullish from a medium-term perspective. Only in that case, our earlier bullish outlook of seeing 64,000-65,000 on the upside will come back into the picture.

Sensex will come under pressure again on a fall below 57,000. In that case, 56,300 can be seen first. It will also keep the door open to see 55,000 on the downside.

For now, the danger of a fall below 57,000 seems to have reduced. However, we will have to watch the price action for a couple of weeks to get a confirmation.

Crucial resistances
17,800 – 18,000 on the Nifty
61,000 – 61,500 on the Sensex
41,350 - 42,000 on the Nifty Bank
Nifty Bank (40,608.65)

The support at 39,000 has held well and the Nifty Bank index has risen sharply last week. The index made a high of 40,690.40 on Friday before closing at 40,608.65, up 3.1 per cent for the week. This has reduced the danger of the fall to 38,000 that we have been warning over the last couple of weeks. However, the chances are not completely negated yet.

Graph Source: MetaStock

Graph Source: MetaStock

Support for the coming week is at 40,000. If the Nifty Bank manages to sustain above this support, a rise to 41,350 and even 42,000 is possible in the short term. From a big picture perspective, the region around 42,000 is a crucial resistance. Nifty Bank index has to breach 42,000 to regain its bullish momentum. In that case, the doors will open for a fresh rally to 44,000-45,000. For this break and rise to happen, Nifty Bank index has to sustain above 40,000.

On the other hand, failure to break 42,000 or a reversal from 41,350 itself can keep the index vulnerable to break 40,000. In that case, a retest of 39,000 and the chances of the fall to 38,000 will continue to remain alive.

Dow Jones (33,274.15)

As expected, the Dow Jones Industrial Average rose breaking above 32,500 last week. The index was up 3.2 per cent for the week. It has closed on a strong note at 33,274.15. But resistances are coming up at 33,400, 33,700 and 34,000

Graph Source: MetaStock

Graph Source: MetaStock

So, the coming week is going to be very crucial for the Dow Jones. A test of 34,000 looks likely this week if the momentum sustains. A reversal from around 34,000 can take the index down to 32,500 and even lower. The price action in the next couple of weeks is going to be crucial to watch.