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Nifty 50 and Sensex scaled new highs last week. The indices broke above their key resistances and surged over 3 per cent last week. Both the indices have closed on a strong note and are looking bullish.
Nifty Bank index, on the other hand, outperformed the Sensex and Nifty last week. The index surged over 5 per cent.
Overall, the picture is looking bullish and strong on the charts. The Sensex, Nifty 50 and the Nifty Bank indices can continue to move higher from here.
Among the sectors, the BSE Healthcare and BSE FMCG indices closed in red. They were down 0.47 per cent and 0.35 per cent respectively. Other indices were up. The BSE Power index outperformed by surging 13 per cent last week. This was followed by the BSE Oil & Gas (up 7.66 per cent) and BSE PSU index (up 6 per cent).
Strong inflows
The foreign portfolio investors (FPIs) continued to pour money into the Indian equity markets. The equity segment saw an inflow of $2 billion last week. December has started on a strong note in terms of foreign money flows. The month has seen a net inflow of $3.18 billion so far. This is positive for the Indian equities. Continuing flows can aid the Sensex and Nifty to make more new highs, going forward.
Nifty 50 (20,969.40)
The expected corrective fall from the resistance at 20,600 did not happen. Instead, the Nifty surged breaking above this resistance in its first attempt itself. Nifty touched a new high of 21,006.10 before closing the week at 20,969.40. The index was up 3.46 per cent for the week.
Short-term view: The outlook is bullish. Immediate support is at 20,850. Below that, strong support is in the 20,650-20,500 region. A fall below 20,500 is less likely. Nifty can rise to 21,500-21,750 in the next two-three weeks or even earlier than that. The region between 21,500 and 21,750 is a strong resistance. So, there are high chances for the current rally to halt anywhere in that zone. So, more caution is needed as the Nifty moves higher from here.
The short-term outlook will turn negative only if the Nifty breaks below 20,500. Such a break can drag the index down to 20,100-20,000 thereafter. But such a fall looks less likely.
We prefer the Nifty to sustain above 20,500 for now and rise to 21,500-21,750.
Chart Source: MetaStock
Medium-term view: From a big picture perspective, the region between 21,500 and 21,700 is a very strong resistance zone. We expect this resistance to cap the upside and hold on its first test. As such, Nifty can see a corrective fall from the 21,500-21,700 region towards 20,700 or even 20,500 initially. In a worst-case scenario, if the Nifty declines below 20,500, the corrective fall can extend up to 20,000.
On the other hand, if the Nifty manages to breach 21,750 in its first attempt itself, then 22,000 and higher levels can be seen.
Nifty Bank (47,262)
Nifty Bank index has surged breaking above the 46,000-46,200 resistance zone. The index has closed on a strong note for the week at 47,262, up 5.62 per cent.
Short-term view: The outlook is bullish. The region between 46,200 and 46,000 will now act as a strong support zone and limit the downside. Intermediate resistance is in the 48,000-48,200. This can be tested in the coming week.
An eventual break above 48,200 will boost the bullish momentum. Such a break can take the Nifty Bank index upto 49,500-49,700 in the short term.
The outlook will turn negative only if the Nifty Bank index declines below 46,000. In that case, the index can come down to 45,000. But such a fall looks less likely at the moment.
Chart Source: MetaStock
Medium-term view: As mentioned last week, the big picture is very bullish for the Nifty Bank index. The recent rise from around 42,000 keeps the long-term uptrend intact. It has potential to take the Nifty Bank index up to 50,000-50,500 in the coming months. The price action, thereafter, will need a close watch for a correction.
Sensex (69,825.60)
The break and rise above 68,500 has happened much quicker than we expected. Sensex surged to a high of 69,893.80 last week. It has closed at 69,825.60, up 3.47 per cent for the week.
Short-term view: Immediate and important resistance is at 70,000, which can be tested early this week. Failure to breach this psychological 70,000-mark can trigger a corrective fall to 69,000 and even 68,500. But such a fall could just be a correction within the broader uptrend. That will not change the overall structure of the chart.
On the other hand, if the Sensex manages to breach 70,000 in its first attempt itself, a further rise to 71,000 and higher is possible.
Chart Source: MetaStock
Medium-term view: The outlook is bullish. Strong support will now be in the 68,500-68,000 region. As long as the Sensex stays above 68,000, it has potential to target 73,500 over the medium term.
From a long-term perspective, the Sensex has room to target 76,000 and even 78,000 if it continues to sustain above 68,000.
The index will come under pressure for a steep correction only if it declines below 68,000. In that case, a revisit of 65,000-levels is possible.
Dow Jones (36,247.87)
The Dow Jones Industrial Average remained stable and range bound last week. It oscillated up and down inside a narrow range between 36,000 and 36,300 all through last week. The index has closed the week on a flat note at 36,247.87.
Chart Source: MetaStock
Outlook: The immediate outlook is slightly unclear. Support is around 36,000. Resistance is in the 36,250-36,300 region. So, 36,000-36,300 can broadly continue to be the trading range. A breakout on either side of 36,000 or 36,300 will determine the next move.
A break above 36,300 can see the current upmove extending towards 36,800-36,850. On the other hand, a break below 36,000 can bring the index under pressure. Such a break can drag the Dow Jones down to 35,500 or even lower, going forward.
The US Federal Reserve’s policy announcement is on Wednesday. The outcome of this meeting could set the path for the Dow Jones. We will have to wait and watch.
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