Index outlook: RBI meet outcome to decide Nifty’s record-breaking course

Benchmark indices Sensex and Nifty 50 extended the recent bullish momentum in the past week as well. The appreciating rupee and positive global markets kept the upward journey intact. In the week ahead, May month auto sales data and upcoming Reserve Bank of India (RBI) policy review between June 2 and 4 will be crucial for the equity markets. At higher levels, profit-booking can result in minor corrective dips, hence investors should tread with caution.

On the global front, the focus will be on the May jobs report, the economy and the Fed, in the ensuing week.

Nifty 50 (15,435.65)

After an initial testing of the key resistance at 15,200, the Nifty 50 index has decisively surpassed this barrier by advancing 270 points or 1.7 per cent in the past week. This rally has further strengthened the bullish momentum. So far, the index has gained 5.5 per cent in May.

The week ahead : On Friday, the index climbed 0.6 per cent and closed at record high, marking an all-time high at 15,469. The index altered the prior short-term downtrend recently, and the budding uptrend has been in formation since it took support at late April low of 14,151 levels. The index trades well above the 21- and 50-day moving averages. Both the daily and the weekly relative strength indices feature in the bullish zone. Besides, the daily as well as the weekly price rate of change indicators are hovering in the positive terrain, implying buying interest. However, the index could encounter resistance ahead at 15,500. A conclusive breakthrough of this level can take it higher to 15,600 initially and then to 15,800 levels over the short term.

Conversely, any correction from the current levels can find an initial support at 15,200 level and then at 15,000. But a strong plunge below the psychological base level of 15,000 can bring back selling pressure and pull the index lower to 14,800, which is the 50 per cent fibonacci retracement of the current short-term uptrend. Subsequent supports are placed at 14,500 and then at 14,200 levels. A downward break of the significant support level of 14,000 can pull the index lower to the next support in the range of 13,500-13,600. Supports thereafter are at 13,330 and 13,000 levels.

Medium-term outlook : Both the intermediate and the medium-term uptrends continue to be intact for the index. It has strengthened the medium-term uptrend that has been in place since it took support at the December 2020 low of 13,131 levels. The recent breach of the hurdle at 15,200 has underpinned the uptrend and can gradually take the index northwards to 15,500 and then to 15,600 over the medium term. Subsequent resistances can be encountered at 15,800 and 16,000-mark.

The medium-term uptrend will stay in place as long as the index trades above the crucial base level of 14,000 levels. However, a strong downward breakthrough of this base can alter the uptrend and drag the index lower to the 13,500-13,600 band and then to 13,000 levels over the medium term.

Sensex (51,422.88)

Last week, the Sensex climbed 1.75 per cent extending the bullish momentum; it surpassed the vital resistance at 51,000. It is short of the all-time high registered at 52,516 in mid-February this year. Although the index trades well above the 21- and 50-day moving averages, it now tests a crucial hurdle at 51,400 levels. A strong rally above this can pave the way for an up-move to 52,000 levels in the coming weeks. An emphatic break above this key barrier will provide strength to surpass the February high and record new highs. Next resistances are at 53,000 and 54,000 levels.

On the downside, the key immediate supports at 51,000 and 50,400 can cushion the index on corrective declines. A conclusive fall below these supports can pull it down to 50,000. A strong plunge below 50 per cent Fibonacci retracement level of the on-going uptrend at 49,370 will weaken the uptrend and pull the index lower to 49,000 and then to the next key support in the 47,700-48,000 zone. We restate that investors with a long-term horizon can stay invested with a long-term stop-loss at 41,000.

Nifty Bank (35,141.45)

The Nifty Bank index extended the up-move and advanced 534 points or 1.5 per cent in the week ago amid volatility. It now tests resistance at around 35,000. The daily as well as the weekly relative strength indices are featuring in the bullish zone. A strong rally above 35,000-mark will reinforce the bullish momentum and pave the way for an up-move to 35,500 and then to 36,000 levels. In that case, traders can initiate fresh long positions with a fixed stop-loss.

A decisive breakthrough of 36,000 barrier is needed to strengthen the uptrend that commenced from the April low of 30,405 levels and take the index northwards to 36,550 and then to 37,000 levels over the medium term. But a decline below the immediate base level of 34,660 will bring back selling interest and drag the index lower to 34,000 levels.

In that case, traders should avoid taking fresh long positions. Next vital supports are placed at 33,500 and 33,000 levels. A plunge below 33,000 will intensify the selling pressure and pull the index further down to 32,000 or even to 31,000 levels over the medium term.

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