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Nifty 50 and Sensex opened the week on a positive note as expected. The benchmark indices rose in the first half of the week to test their near-term resistances again. However, they failed to breach the hurdle and fell-back sharply towards the end of the week giving back most of the gains. Sensex and Nifty have closed the week marginally higher.
The sell-off was triggered after the Reserve Bank of India’s (RBI) monetary policy meeting outcome on Thursday. The RBI left the repo rate unchanged at 6.5 per cent. The fall in the indices can extend initially in the coming week possibly ahead of the US Federal Reserve meeting on Wednesday. However, strong supports are coming up. So, the downside is likely to be limited from current levels. We expect the Sensex and Nifty to resume their overall uptrend after testing their key supports this week.
Among the sectoral indices, barring the IT and FMCG, others closed in green. The BSE IT, down 2.55 per cent was beaten down the most. The BSE FMCG index was down 1.02 per cent. The BSE Capital Goods index outperformed. The index surged 5.1 per cent last week. This was followed by the BSE Power index, up 3.37 per cent.
FPIs Buy
The foreign portfolio investors (FPIs) continue to buy Indian equities. The equity segment saw an inflow of about $400 million last week. After pumping in a whopping $5.44 billion to the Indian equities last month, the flows continue to remain strong in this month as well. So far in June, there has been a net inflow of $1.18 billion. Continuing foreign money inflows to the equity segment is a positive for the Sensex and Nifty.
Nifty 50 (18,563.40)
Nifty opened with a gap-up as expected last week. Indeed it broke above the resistance at 18,600 in line with our expectation, but did not sustain. The index made a high of 18,777.90 on Thursday and fell sharply thereafter. Nifty gave back most of the gains to close the week at 18,563.40, up 0.16 per cent.
Short-term view: The immediate picture is weak. There is room to fall further from here. Nifty can test the support at 18,500-18,450 initially this week. But a fall beyond 18,450 is unlikely. We expect the index to begin a new leg of upmove from the 18,500-18,450 support zone. That will take the Nifty up to 18,600 again first. A break above 18,600 will see a test of 18,800-18,900 in a week or two. That will keep the doors open for the Nifty to test 19,000 eventually on the upside in the short term.
The outlook will turn negative only if Nifty breaks below 18,450. In that case, a fall to 18,300-18,250 can be seen first. It will also keep the index vulnerable to revisit 18,000 on the downside. However, we place less probability for this fall to happen.
Graph Source: MetaStock
Medium-term outlook: The big picture is bullish. However, intermediate corrections cannot be ruled out before the Nifty scale to new highs.
The region between 19,000 and 19,200 is a crucial resistance. We can expect current uptrend to pause here. A corrective fall to 18,700-18,600 is a possibility first. But thereafter the uptrend can resume which will have the potential to breach 19,000. That break will pave way for the Nifty to target 20,000 and even 20,500 in the coming months.
Sensex (62,625.63)
Sensex failed to see a sustained break above 63,000 for the second consecutive week. It made a high of 63,321.40 and fell giving back most of the gains. The index has closed the week at 62,625.63, up 0.13 per cent.
Short-term view: Sensex can dip further. But the downside could be limited from here as strong supports are coming up. 62,300 is the key support which is likely to hold well. Sensex can bounce back again after testing this support. That bounce can take the index up to 63,000 again. A sustained break above 63,000 can take the Sensex up to 64,000-64,300 in the short term.
The above-mentioned rise will get delayed if a break below 62,300 happens. In that case, an extended fall to 61,500 or even 61,000 can be seen before a fresh rally begins.
Graph Source: MetaStock
Medium-term outlook: The medium-term outlook is bullish for the Sensex to see 65,000-66,000, going forward. However, a correction from 64,000-64,300 can happen first. That can take the index down to 62,000. Thereafter, a fresh leg of upmove can begin targeting 65,000-66,000 on the upside over the medium term. It will also keep our long-term bullish view intact for the Sensex to touch 68,000-68,500 in the coming months.
Nifty Bank (43,989)
Nifty Bank index seems to be struggling to gain momentum. The index has been oscillating around 44,000 over the last few weeks. The index made a high of 44,459.25 and has come-off from there. It has closed the week at 43,989, up 0.12 per cent.
Short-term view: The immediate outlook is mixed. The 21-Day Moving Average support around 43,980 has been limiting the downside very well. A bounce from current levels and an eventual break above 44,500 can bring boost the bullish momentum. In that case, a rise to 45,000 and 45,500 can happen from here itself.
But if the Nifty Bank index breaks below 43,980, a fall to 43,500 can happen first. Thereafter a fresh leg of rally can begin. That will take the Nifty Bank index up to 45,000-45,500 eventually in the coming weeks.
Overall, the short-term view is positive to see 45,000-45,500. But whether this rise will happen from here itself or after a dip to 43,500 is not very clear at the moment.
Graph Source: MetaStock
Medium-term outlook: The medium-term outlook is bullish. Nifty Bank index has potential to target 47,000-48,000 in the coming months. A strong break above 45,500 can open the doors for this rally. However, we expect it to happen after a short-lived correction from the 45,000-45,500 region.
Dow Jones (33,876.78)
The Dow Jones Industrial Average fell to a low of 33,399.69. But thereafter the index gained momentum and moved up well for the rest of the week. It has closed at 33,876.78, up 0.34 per cent.
Graph Source: MetaStock
The outlook is bullish. Strong support is in the 33,500-33,300 region. Resistance is in the 34,200-34,250 region. This can be tested in the coming week. A pull-back from here, if seen, can be limited to 33,800. However, an eventual break above 34,250 can take Dow Jones up to 35,000 and 35,500 in the coming weeks.
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