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Last year exactly a week before Diwali, Nifty was showing signs of a bearish reversal. This year, it is exactly the opposite. A strong weekly close on the Sensex and Nifty, the strong bounce in the Dow Jones Industrial Average from a crucial long-term support and the Nifty Bank index closing decisively above 40,000 are all giving out strong positive signals. Both the Sensex and Nifty were up over 2 per cent last week and the Dow Jones has surged over 4 per cent. In a way, the equity markets are getting ready to see some fireworks in the form of a rally.
Please note that the coming week is a truncated one with just three trading days. Indian markets are closed on Monday and Wednesday for Diwali. So, the fireworks rally indicated above will happen gradually over the next few weeks.
Among the sectors, barring the BSE Metals (down 0.99 per cent) and BSE Consumer Durables (down 0.16 per cent), other sectoral indices have closed in green last week. The BSE Bankex outperformed by surging 4.18 per cent.
Nifty 50 (17,576.30)
Nifty rose breaking above 17,400 and tested 17,600 last week. The index made a high of 17,670.15 on Friday and has come off from there to close at 17,576.30, up 2.27 per cent for the week.
The week ahead: The outlook is bullish. Strong support for the Nifty is at 17,440. Below that 17,200-17,150 and the 21-Week Moving Average (MA) at 16,928 are the important supports. Immediate resistance is at 17,600 which has held well last week.
Graph Source: MetaStock
The chances are high for the Nifty to sustain above 17,440 itself and break above 17,600 this week. Such a break can take the Nifty higher to 18,000-18,100 by this week itself or next week.
The near term outlook for Nifty will turn negative only if it breaks below 17,440. In that case, Nifty can fall to 17,200-17,150.
Medium-term outlook: The bigger picture remains bullish. Strong supports are at 16,600 and then at 16,291 — the 100-Week MA. The medium-term outlook will turn bearish only if the Nifty breaks below the 100-Week MA support.
Crucial resistance is at 18,100. On the charts, there are strong signs that the Nifty will see a breakout above 18,100 in the coming weeks. Such a break will take the Nifty up to 18,700 and 19,400 initially.
From a long-term perspective, we expect Nifty to test 20,500 in the coming months. On the charts, we see that this could be a good time to enter the markets for long-term investors.
Sensex (59,307.15)
The break above 58,530 and the rise to 59,500 has happened as expected. Sensex made a high of 59,590.93 on Friday before closing the week at 59,307.15, up 2.39 per cent.
The week ahead: The outlook is bullish. Immediate support is at 58,735. Below that 57,500 and 56,840 are the important short-term supports. We expect the Sensex to sustain above 58,735 and rally to 60,400-60,500 in the near-term.
Graph Source: MetaStock
In case the Sensex falls below 58,735, it can fall to 58,000-57,900. But that is less probable.
Medium-term outlook: The bullish case for the medium term is getting strengthened. As mentioned last week, 60,500 is a crucial resistance. We see high chances for the Sensex to break above 60,500 and rally to 63,000 and even higher in the coming months.
The 100-Week Moving Average (MA) at 54,688 is a crucial medium-term support for the Sensex. The bullish outlook will get negated only if the index falls below this support decisively. In that case, Sensex can come under pressure to see 50,000 on the downside. But such a strong fall is looking unlikely as seen from the charts now. For this fall to happen, Sensex has to remain below 60,500 and fall below 56,840 to indicate an initial sign of weakness.
Nifty Bank (40,784.05)
As expected, the Nifty Bank index sustained well above 39,000 and has risen past 40,000 last week. This leaves the index on a strong footing. Nifty Bank made a high of 41,032.25 on Friday and has come off from there to close at 40,784.05. The index is up 3.76 per cent for the week.
Graph Source: MetaStock
The outlook is bullish. Immediate support is at 40,300. Below that 40,000 will be the psychological support. We expect the Nifty Bank index to sustain well above 40,000 in the coming days. A rally to 42,000 and 42,500 is on the cards going forward.
Global cues
The Dow Jones Industrial Average (31,082.56) saw a strong surge on Friday. The index, up 4.88 per cent, has closed the week on a strong note. On the charts, there are good initial signs of a bottom formation. First, the recent has happened from around a very crucial long-term support level of 28,500. Second, the surge, last week, has happened after three weeks of sideways consolidation. This, in a way, indicates a base formation. So, broadly, the outlook is bullish for the Dow Jones, going forward.
Immediate support is at 30,650. Below that, 30,000-29,800 is the next strong support zone. Resistance is in the 31,400-31,500 region. The chances are high for the Dow to break above this 31,400-31,500 resistance if not immediately this week, but eventually going forward. Such a break will pave way for a rally in the Dow to 32,500 and 32,800.
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