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The global equity markets have seen a strong rally last week. The rally in equities gained momentum after the US Federal Reserve meeting on Wednesday. The Fed kept the interest rates unchanged at 5.25-5.5 per cent. In their economic forecast, they had projected three rate cuts next year. This came as a big cheer for the market and took the Dow Jones Industrial Average, Sensex, Nifty 50 and the Nifty Bank indices to record highs last week. It has also helped the Santa Claus rally to arrive early for the markets this year. On the charts, the benchmark indices are looking strong. There is room to rise further from here. However, key resistances are also coming up for the indices which will need a very close watch.
Among the sectors, barring the BSE Consumer Durables index, down 0.4 per cent, others ended in green last week. The BSE IT index surged about 7 per cent and outperformed last week. It was followed by the BSE PSU and BSE Metals indices which were up 4.56 per cent and 4.49 per cent respectively.
More inflows
The Indian equity segment continued to get strong foreign money inflow for the third consecutive week. The foreign portfolio investors (FPIs) poured in $1.53 billion last week. December has seen a net inflow of $4.7 billion so far. Foreign money inflows will continue to aid the benchmark indices to scale new highs. It will also help in limiting the downside, in case there is a corrective fall.
Nifty 50 (21,456.65)
The rise to 21,500 almost happened last week in line with our expectation. Nifty 50 touched a new high 21,492.30 before closing the week at 21,456.65. The index was up 2.32 per cent for the week.
Short-term outlook: The sustained rise above 21,000 last week retains the bullish picture. Immediate support is at 21,200-21,000. Nifty can rise to 21,700-21,750 – an important resistance zone that can halt the current rally.
A turnaround from the 21,700-21,750 resistance zone can trigger a corrective fall to 21,000 initially. A break below 21,000 can drag the Nifty even lower to 20,800 and 20,500.
On the other hand, if the Nifty breaks above 21,750 comfortably in its first test itself, an extended rise to 22,000-22,200 is possible.
Broadly, we can allow for a rise to 21,700-21,750 and then have to watch the price action closely to see if a reversal is happening or not.
Chart Source: MetaStock
Medium-term view: From a big picture perspective, 20,500-20,000 will now be a very strong support. Resistance is around 21,800. So, 20,000-21,800 can be a possible trading range for the coming months. This is assuming that the Nifty fails to breach 21,800 in the coming weeks.
But as long as the Nifty stays above 20,000, the bias will remain positive. As such, chances are high for the index to breach 21,800 eventually. That can take the Nifty up to 24,000-24,500 over the medium term.
Sensex (71,483.75)
Sensex has risen well last week breaking above the key resistance level of 70,000. The index recorded a new high of 71,605.76 before closing the week at 71,483.75, up 2.37 per cent.
Short-term view: The decisive break above 70,000 keeps the overall bullish view intact. Immediate support is at 71,000-70,900. Below that 70,200-70,000 will be the next strong support zone. As long as the Sensex trades above these supports, the outlook is bullish to see a rise to 73,300-73,400 in the coming weeks. Thereafter, a corrective fall to 72,000-71,000 is a possibility.
The short-term outlook will turn negative only if the Sensex declines below 70,000. In that case, a fall to 68,500 is possible. However, a fall below 70,000 looks less probable at the moment.
Chart Source: MetaStock
Medium-term view: The big picture is very bullish for the Sensex. The broad 69,000-67,000 can be a very strong support zone now. As long as the Sensex stays above this support zone, it has potential to target 76,500 and even 78,500 in the coming months.
As such, a fall below 70,000, if seen now, will be a very good buying opportunity rather than a trend reversal.
Nifty Bank (48,143.55)
The rise to 48,200 happened in line with our expectation. The Nifty Bank index made a new high of 48,219.95 last week. It has closed at 48,143.55, up 1.87 per cent for the week.
Short-term view: The outlook is bullish. Immediate support is around 47,800. Below that 47,500-47,400 will be the next important support zone. Outlook is bullish. Nifty Bank index can rise to 49,700-49,900 in the next few weeks. Thereafter, a corrective fall to 48,000 can be seen.
The short-term outlook will turn negative only if a fall below 47,400 is seen. In that case, the Nifty Bank index will come under pressure for a fall to 46,200-46,000. But such a fall looks unlikely at the moment. As such, we see high chances for the Nifty Bank index to see 49,700-49,900 on the upside first.
Chart Source: MetaStock
Medium-term view: The level of 49,900 and then the 50,300-50,600 region are strong resistances for the Nifty Bank index. We can expect the current rally to see a top at any of the above-mentioned two levels. A corrective fall to 48,000-47,000 or even 46,000 looks like a possibility. We will have to wait and see the price action.
Dow Jones (37,305.16)
The Dow Jones Industrial Average has risen well beyond our expected level of 36,850 last week. The index recorded a new high of 37,347.60 before closing the week at 37,305.16, up 2.92 per cent. The Dow Jones has been moving up consistently over the last seven weeks and has surged about 15 per cent.
Chart Source: MetaStock
Outlook: The decisive rise above 36,000 has turned the charts very strong. The outlook is bullish. The Dow Jones can outperform the Indian benchmark indices in the coming weeks.
The region between 36,200 and 36,000 will now be a very strong support. The Dow Jones has potential to target 39,200-39,300 in the next few weeks.
This 39,200-39,300 is a strong resistance zone. As such, the rally can halt in this resistance zone. A corrective fall to 38,000 and even lower levels is possible thereafter.
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