The benchmark indices, the Nifty 50 and the Sensex, started the previous week on a bearish note. Weak global markets and crude oil price moving above $52 per barrel pressured stock prices. However, short-covering and positive sentiment in stocks of PSU banks and financial services companies pushed the Nifty index above the 9,200-mark on Tuesday. Investors remained cautious thereafter ahead of macro economic data such as IIP and CPI inflation numbers.

The retail inflation rate increased to 3.81 per cent in March from 3.65 per cent recorded in February. For 2017-18, the RBI has projected retail inflation to average 4.5 per cent in the first half and 5 per cent in the second half in its recent policy meeting, indicating less room for further rate cuts.

The Index of Industrial Production (IIP) fell to a four-month low, declining 1.2 per cent in February, dragged by manufacturing capital as well as consumer goods sectors. The economic data appears to have disappointed investors. The indices turned volatile and profit-taking gradually dragged them lower on Wednesday.

In the truncated week, the Nifty declined 47 points or 0.5 per cent and the Sensex slipped 245 points or 0.8 per cent. Moving forward, March quarter results of blue chip companies and global geopolitical tensions could influence the next move.

Nifty 50 (9,150.8)

Last week, the Nifty 50 index fell 0.5 per cent amid choppiness and currently tests the 21-day moving average.

This week: The Nifty index tested the key immediate resistance in the band between 9,200 and 9,218 but failed to surpass this range last week. The index has now widened its resistance band. So, only a strong rally beyond 9,240 can push the index northwards to 9,286 and 9,353 in the short term. However, last week’s fall in the index confirms the formation of a shooting star candlestick pattern in the weekly chart.

This decline could turn into a short-term trend reversal if the index continues to slump further. Moreover, the daily relative strength index has entered the neutral region from the bullish zone and also shows negative divergence.

Likewise, the daily price rate of change indicator is also displaying negative divergence and is on the brink of slipping into negative territory, implying selling interest. The weekly price rate of change indicator is also showing negative divergence and is trending downwards.

A weak start and a fall below the immediate support level of 9,100 will start strengthening the downtrend and pulling the index down to 9,000 and 8,950 support band in the ensuing week.

Conclusive plunge below 8,950 can strengthen the down-move. Next key supports are at 8,860 and 8,800 levels, which could be tested in the short term. Traders with a high risk appetite can consider initiating short position if the index fails to move beyond 9,240 with a fixed stop-loss.

Medium-term trend: The medium-term uptrend in the index will remain in place as long as it trades above the significant support level of 8,500.

Conclusive rally above 9,353 can take the index higher to 9,500. Key supports below 8,500 are placed at the levels of 8,350 and 8,250.

Sensex (29,461.4)

The Sensex confirmed the formation of a shooting star candlestick pattern in the weekly chart by declining last week. It has marginally breached its 21-day moving average and continues to test the key resistance in the broad range of 29,500-30,000.

The relative strength index has entered the neutral region from the bullish zone, implying weakness. Further selling interest is evident as the daily price rate of change indicator has slipped into the negative territory.

Both the weekly relative strength index and price rate of change indicators are displaying negative divergence, signifying that short-term trend reversal is in the offing.

We reiterate that a strong tumble below 29,500 can strengthen the down move and pull the index down to 29,350 or even to 29,000 level in the short term.

A downward break of 29,000 can mitigate the short-term uptrend and pull the index lower to 28,740 and 28,500. Significant long-term support at 27,500 can keep the medium-term up-trend intact. Subsequent support is at 27,000. On the other hand, if the index emphatically breaks above 30,000 then it can accelerate to 30,500 levels in the medium term.

Bank Nifty (21,686.8)

The Bank Nifty rose 255 points or 1.2 per cent last week, outperforming the broader indices. This was contrary to our expectations. However, the indicators and oscillators in the daily chart continue to display negative divergence implying that a trend reversal is in the pipeline.

Weak start and a fall below the immediate support level of 21,500 will diminish the possibility of the index rallying to 22,000.

Then, the index can decline to 21,000 and then to 20,700 levels in the short term. To alter the short-term up-trend, the index needs to decisively close below 20,700 levels. Key supports below 20,500 are at 20,370, 20,150 and 20,000.

Traders with a short-term horizon can go short only if the index falls below 21,500 with a tight stop-loss. The medium-term uptrend will continue to stay intact as long as the index hovers above 19,000 level.

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