Index Outlook: Sensex, Nifty 50 can go either way

It has not been a good beginning for the Sensex and Nifty 50 so far in this New Year. The benchmark indices are struggling to find direction and are oscillating up and down. Sensex and Nifty have been range bound over the last three weeks.

However, in the US, 2023 has begun on a positive note. The Dow Jones Industrial Average has moved up very well in the first two weeks of the New Year. It is looking bullish to move further up from here. Will the Indian benchmark indices also join the US markets in the rally? For now, it is not very clear and we will have to wait and watch.

Among the sectors, the BSE Metals and BSE IT indices outperformed by rising 3.88 and 3.37 per cent respectively. The BSE Consumer Durables index, down 2.93 per cent, was beaten down the most.

Also read: Movers & Shakers: Stocks that will see action this week

More outflows

The Foreign Portfolio Investors (FPIs) continued to sell the Indian equities for the third consecutive week. The equity segment saw an outflow of $1.12 billion last week – the highest in a single week since October last year. The FPIs have pulled out about $1.83 billion since the beginning of the year. If the FPIs continue to sell, then Nifty and Sensex can remain under pressure to fall more.

Nifty 50 (17,956.60)

Nifty seems to lack strong follow-through buyers. The index made a high of 18,141.40 on Monday but then fell back sharply and remained below 18,000 for most part of the week. Nifty touched a low of 17,761.65 and then bounced back to close the week at 17,956.60, up 0.54 per cent.

The week ahead: The near-term outlook is unclear. Nifty can go either way from here and there is no clarity as of now.

The weekly candle shows that the market is indecisive. However, the price action on the daily candles indicate that Nifty is getting fresh buyers below 17,800.

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Support for the week will be at 17,800-17,775. If Nifty sustains above this support and breaks above 18,000, it can rise to 18,080 and 18,230-18,265 this week.

Broadly, 17,775-18,265 will continue to be the trading range for some more time. An upside break above 18,265 can take the Nifty up to 18,450 initially. It will also keep the doors open to revisit 19,000 levels going forward.

On the other hand, a sustained break below 17,775 can drag the Nifty down to 17,500-17,450.

Graph Source: MetaStock

Medium-term outlook: The bigger picture is bullish. The fall from the December high of 18,887 is a correction within the overall uptrend; 17,500-17,400 is a strong support that can limit the downside. As long as the Nifty sustains above 17,400, the outlook is bullish to target 19,800-20,200 in the coming months.

Nifty will come under more pressure only if it breaks below 17,400. In that case, an extended fall to 17,000 can be seen.

Sensex (60,261.18)

The support at 59,650 is holding well and the Sensex is managing to stay afloat. It remained below 61,000 all through the week and made a low of 59,628.43. Sensex has bounced from this low to close the week at 60,261.18, up 0.6 per cent.

The week ahead: The near-term outlook is mixed. Sensex can continue to trade sideways for some more time. The trading range can be 59,630-60,800 (narrow) or 59,630-61,200/61,400 (broad).

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A breakout on either side of 59,630-61,400 will determine the next move. A break above 61,400 will be bullish to see 61,900-62,000 on the upside. On the other hand, a break below 59,630 can increase the downside pressure. Such a break can drag the Sensex down to 58,700-58,600.

Graph Source: MetaStock

Medium-term outlook: The medium-term outlook is bullish with strong supports at 58,600 and 57,500. We expect the Sensex to sustain above these supports and keep the overall uptrend intact. From a medium-term perspective, Sensex can target 65,500-66,000 in the coming months. A strong break above 62,000 will open doors for this rally.

Nifty Bank (42,371.25)

The Nifty Bank index remained subdued and was stuck in narrow range last week. The index has closed at 42,371.25, up 0.43 per cent for the week.

The near-term outlook is unclear. Crucial support is at 41,800-41,700. Resistances are at 42,700, 42,870 and 43,200. So broadly, 41,700-43,200 can be the near-term trading range. A breakout on either side of this range will determine whether the Nifty Bank index will fall to 41,000 or rise to 44,000.

Graph Source: MetaStock

From a medium-term perspective, Nifty Bank index can oscillate in a broad range of 41,000-44,000 for some time. Within this, the bias is bullish. We expect the Nifty Bank index to breach 44,000 eventually. Such break will open doors for 46,000-46,500 and higher levels going forward.

Supports to watch

17,775 on the Nifty

59,630 on the Sensex

41,700 on the Nifty Bank

Dow Jones (34,302.61)

The Dow Jones Industrial Average has risen above 34,000 in line with our expectations. The index has closed on a strong note at 34,302.61, up 2 per cent for the week. Dow Jones has risen 3.5 per cent over the last two weeks.

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The outlook is bullish. Strong supports are at 33,850 and 33,650. There is room to move further up from here to test the resistances at 34,850 and 35,400 in the short term.

Graph Source: MetaStock

The level of 35,400 is a very crucial resistance. It might hold on its first test and trigger a corrective fall to 34,500. However, the overall bias will continue to remain positive. As such, we can expect the Dow Jones to break above 35,400 eventually in the coming weeks. Such a break will be very bullish from a long-term perspective. It will clear the way for the Dow to target 38,000 over the medium term and 40,000 levels over the long term.

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