Nifty 50, Sensex and Nifty Bank indices fell sharply last week. We had expected the benchmark indices to rise last week. That view had gone wrong. Sensex and Nifty fell about 2 per cent each. Nifty Bank index was down 2.6 per cent. The mid-cap and small-cap indices were beaten down the most.           

The BSE MidCap index was down 4 per cent and the BSE SmallCap index tumbled 5.91 per cent last week. Among the sectors, only IT ended in green. Other sectors fell last week. The BSE IT index was up 0.48 per cent. The BSE Realty and BSE PSU indices fell the most. They were down 9.33 per cent and 8.49 per cent respectively.

On the charts, the short-term outlook is slightly unclear. The benchmark indices can go either way from here. So, considering the volatility and the uncertainty, we suggest the traders to remain cautious and trade with strict stop-loss. Risk-averse traders can better stay out of the market for some time until a clarity is obtained on the market direction.

Strong inflows

The foreign portfolio investors (FPIs) poured money into the equities last week. The equity segment saw an inflow of $3.5 billion – the highest weekly inflow since July last year. The month of March has seen a total inflow of $4.92 billion so far. If the FPIs continue to buy the equities, then the downside in the Sensex and Nifty could be limited.

Nifty 50 (22,023.35)

Nifty failed to get a strong follow-through rise above 22,500 and fell sharply last week. The index made a low of 21,905.65 on Wednesday and then remained stable for the rest of the week. It has closed at 22,023.35, down 2.09 per cent for the week.

Short-term view: The outlook is unclear. Support is in the 21,900-21,880 region. Resistance is around 22,250. A breakout on either side these two levels will determine the next leg of move.

A break above 22,250 will strengthen the bullish case. Such break can take the Nifty up to 22,600-22,700. On the other hand, a break below 21,880 will be bearish. It will increase the downside pressure and drag the index down to 21,600-21,500.

Chart Source: MetaStock

Chart Source: MetaStock

Medium-term view: The fall last week has not altered the medium-term structure. However, it is important to remain cautious at the moment rather than being overly bullish. As mentioned last week, there is not much room left on the upside; 23,150 and 23,650 are strong resistances that can cap the upside. A strong corrective fall is possible from either of these two levels. That corrective fall can drag the Nifty down to 21,000 and even 20,500-19,500 – in a worst case scenario.

In case Nifty declines below 21,500 from here itself, then the rise to 23,150-23,650 can get negated. If that happens, then the above mentioned corrective fall to 21,000 and lower levels can be seen from here itself.

Nifty Bank (46,594.10)

Nifty bank index failed to sustain the break above 47,400. The index fell back sharply below 47,000 last week. It made a low of 46,310.50 before closing the week at 46,594.10, down 2.6 per cent.

Short-term view: Immediate support is at 46,000. Resistance is around 47,400. The Nifty Bank index has to sustain above 46,000 and then break above 47,400 to bring back the bullishness. Only in that case, a rise to 48,500 and 49,000 will come into the picture again.

If the index declines below 46,000, the outlook will turn negative. In such a scenario, the Nifty Bank index can fall to 45,000 and 44,500 in the short term.

Chart Source: MetaStock

Chart Source: MetaStock

Medium-term view: The 44,400-48,650 range remains intact for now. The region around 44,000 is a very strong support. As long as the Nifty Bank index sustains above 44,000, the bias will remain bullish.  A break above 48,650 can take the index up to 49,500-49,600. A decisive break above 49,600 will boost the bullish momentum. Such a break will take it up to 51,500-52,000 and even 53,000. Thereafter, a corrective fall to 50,000 and lower levels is possible.

The outlook will turn bearish only if the Nifty Bank index declines below 44,000. That will open the doors for a fall to 43,000 and lower levels.

Sensex (72,643.43)

Sensex failed to sustain above 74,000 and fell sharply breaking below 73,000. It made a low of 72,484.82 and has closed the week at 72,643.43, down 1.99 per cent.

Short-term view: The immediate outlook is unclear. Support is at 72,280 and resistance is in the 73,500-74,000 region. A break below 72,280 can take the Sensex down to 71,850. A further break below 71,850 can drag the index down to 70,000.

A strong and sustained rise above 74,000 is now needed to bring back the bullishness. Only in that case, the chances of the rise to 76,000-76,500 will come into the picture.

Chart Source: MetaStock

Chart Source: MetaStock

Medium-term view: The uptrend will remain intact as long as the Sensex sustains above 70,000. That will keep alive the chances of seeing 78,000 on the upside in the coming months.

A break below 70,000 and a subsequent fall below 69,000 will turn the outlook bearish. It can then take the index down to 67,000-66,000.

Levels to watch
Nifty 50: 21,880 and 22,250
Sensex: 72,280 and 74,000
Nifty Bank: 46,000 and 47,400
Dow Jones (38,714.77)

It was a volatile week for the Dow Jones Industrial Average. It bounced back sharply from the low of 38,483.25, but failed to breach 39,200 decisively. The index made a high of 39,201.94 and reversed lower giving back all the gains. The Dow Jones has closed the week on a flat note at 38,714.77.

Chart Source: MetaStock

Chart Source: MetaStock

Outlook: The price action on the daily chart indicates the struggle for the Dow Jones to breach 39,200 over the last few weeks. This leaves the bias negative. Dow Jones can fall to 38,200-38,000 this week. A break below 38,000 will be bearish. Such a break can drag the index down to 37,200-37,000 in the coming weeks.

If the Dow Jones manages to bounce back from around 38,000, it can rise to 39,000-39,200 again. In that case, 38,000-39,200 can be the trading range for some time.

A decisive break above 39,200 and then a subsequent rise past 39,400 is needed to become convincingly bullish. Only then the rise to 40,400 will come into the picture.

The US Federal Reserve meeting outcome on Wednesday will be an important event to watch this week.