Index Outlook: Nifty 50, Sensex: Crucial supports ahead

Equity markets are under pressure. Rising yields in the US, Israel-Hamas war tension are weighing on the global equities. The Indian benchmark indices, the Sensex and Nifty 50, fell over a per cent last week. Nifty Bank and the Dow Jones Industrial Average in the US also had declined over a per cent last week.

However, on the charts, Nifty, Sensex and the Dow Jones have strong supports below the current levels. So, for now there is no major threat for the overall uptrend in the indices.

The Nifty Bank index is looking weaker and more vulnerable to see an extended fall from the current levels. However, that extended fall in the Nifty Bank index will be a very good buying opportunity from a long-term perspective.

Among the sectors, barring the BSE Auto (up 0.54 per cent), other indices closed in red. The BSE Realty index was beaten down the most. The index was down 2.29 per cent. This was followed by the BSE Oil & Gas index which was down 1.91 per cent.

FPI action

The foreign portfolio investors (FPIs) have been pulling out money from the Indian equity segment over the last seven consecutive weeks. They sold $283.7 million in Indian equities last week. The month of October has seen a net outflow of  $1.46 billion from the equity segment. If the sell-off by the FPIs intensifies, then the Sensex and Nifty can come under pressure for more fall from here. We will have to wait and watch.

Nifty 50 (19,542.65)

The expected break above 19,850 did not happened. Instead, Nifty declined below 19,600 and extended the fall last week. It made a low of 19,512.35 before closing the week at 19,542.65, down 1.06 per cent.

Short-term view: The price action over the last couple of weeks indicate a range of 19,500-19,850 on the Nifty. Also, there is a strong support around 19,400. So broadly, 19,400 to 19,850 can the short-term trading range.

Within this, the bias is positive. As long as the Nifty stays above 19,400, the chances are high for it to break above 19,850. Such a break can take it up to 20,000 first and then to 20,400 eventually in the coming weeks.

In case, Nifty breaks below 19,400, an extended fall to 19,100-19,000 can be seen.

Chart Source: MetaStock

Medium-term view: Nifty has been consolidating between 19,000 and 20,400 for more than three months now. This sideways range is likely to remain intact for some more time. From a long-term perspective, we expect Nifty to sustain above 19,000 and breach 20,400 eventually. Such a break will take the index upto 21,500 in the coming months.

This bullish view will go wrong if Nifty breaks below 19,000. In that case, a fall to 18,500-18,000 can be seen.

Sensex (65,397.62)

Sensex failed to sustain above 66,000 and had come down towards 65,200 as mentioned last week. A low of 65,308.61 was made before closing the week at 65,397.62. The index was down 1.34 per cent for the week.

Short-term view: Immediate support is at 65,300. A break below it can take the Sensex down to 65,000-64,800 this week. A further fall beyond 64,800 is less likely.

A bounce either from 65,300 itself or from the 65,000-64,800 support zone can take the Sensex up to 66,000-66,500 again.

Important resistance is at 66,600. Sensex has to break this resistance to move further up to 67,500 and 68,000.

Broadly, 64,800-66,600 will be the trading range for now.

Chart Source: MetaStock

Medium-term view: 64,500 to 68,000/68,500 will be the broad trading range for now. The Sensex can continue to oscillate within this range for some more time. As long as it sustains above 64,500, the bias is bullish. So, we can expect the Sensex to break 68,500 and rise to 70,000 eventually in the coming months.

The outlook will turn bearish only if the Sensex declines below 64,500. In that case, the index can fall to 63,000 and even lower going forward.

Supports to watch

19,400 on the Nifty

64,800 on the Sensex

32,850-32,700 on the Dow Jones

Nifty Bank (43,723.05)

The resistance at 44,700 continues to hold well. Nifty Bank index extended its fall for the fifth consecutive week. The index was down 1.28 per cent last week. It has tumbled over 5 per cent in the last five weeks. Nifty Bank index has closed the week at 43,723.05.

Short-term view: The outlook is weak. The region between 44,600 and 44,700 will continue to act as a strong resistance. Immediate support around 43,600. But the index looks vulnerable to break below it and fall to 43,000 initially. A further break below 43,000 can drag the Nifty Bank index down to 42,850 and 42,700.

To avoid this fall, the index has to rise back immediately and breach 44,700. Only in that case, the Nifty Bank index will get a breather and rise to 45,000 and higher levels.

Chart Source: MetaStock

Medium-term view: The levels of 42,850 and 42,700 mentioned above are strong medium-term supports. We expect them to hold and limit the downside. A bounce from this support zone and a subsequent rise past 45,000 will strengthen the bullish momentum. In such a scenario, Nifty Bank index can rise to 46,000-46,500 first and then to 48,650-48,700 eventually.

The outlook will turn bearish only if the index declines below 42,700. In that case, a fall to 42,000 and lower levels can be seen.

Dow Jones (33,127.28)

The Dow Jones Industrial Average broke above 34,000 initially, but did not sustain. The index made a high of 34,147.63 and fell sharply giving back all the gains. It has closed the week at 33,127.28, down 1. 61 per cent.

Chart Source: MetaStock

Outlook: The near-term outlook is negative. The next supports at 32,850 and 32,700 can be tested this week. But these are very strong support and can halt the fall.

A strong bounce from either of these supports can take the Dow Jones up towards 34,000 again. A subsequent break above the resistance at 34,300 will strengthen the bullish case for a rise to 35,500 and higher levels, going forward.

So, the price action this week is going to be very important for the Dow Jones.

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