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Sensex and Nifty 50 managed to break and rise above their key resistances last week. Although they sustained higher, a strong follow-through rise was not seen. Similarly, the Nifty Bank index broke its resistance, but failed to sustain. The price action on the short-term charts are relatively more positive. That keeps the door open for the Indian benchmark indices to move further up from here. Indeed, the Sensex is looking much stronger among the three on the charts. Though there is room to rise from there, we prefer to stay cautious rather than becoming overly bullish at the momentum.
Among the sectors, the BSE Realty index outperformed last week by surging 4 per cent. The BSE Oil & Gas and BSE IT fell the most. The indices were down 1.92 per cent and 1.06 per cent respectively.
FPI action
The foreign portfolio investors (FPIs) were net buyers of Indian equities last week. They bought $404 million in the equity segment. If the FPIs increase their quantum of buying in the coming weeks, then that could support the Sensex and Nifty to move further higher.
Nifty 50 (22,212.70)
Nifty broke crucial resistance level of 22,150 last week. However, a strong follow-through rise was not seen thereafter. Nifty made a new high of 22,297.50 on Friday before closing the week at 22,212.70, up 0.78 per cent.
Short-term view: Lack of strong follow-through rise above 22,150 last week leaves the near-term outlook mixed. However, the weekly chart is looking relatively more positive than the daily chart. Supports are at 22,150, 22,000 and then at 21,800. If the Nifty manages to sustain above 22,000, a rise to 22,600-22,700 can be seen this week.
The price action, thereafter, will need a close watch. A reversal from around 22,700 can drag the Nifty down to 22,200 and 22,000. On the other hand, a break above 22,700 can take the Nifty up to 23,000 and higher, going forward.
To reduce the chances of a rise to 22,600-22,700, Nifty has to decline below 22,000 from here itself. In that case, 21,800 can be tested this week.
A break below 21,800 will turn the short-term outlook negative. Such a break can drag the Nifty down to 21,500-21,400 and even 21,000 in the coming weeks.
Chart Source: MetaStock
Medium-term view: As mentioned last week, there is not much room left on the upside. Key resistances are at 22,700 and then around 23,500-23,700. We expect the current rally to halt at any of these levels. A reversal from there can trigger a strong corrective fall. That can drag the Nifty down to 21,200-21,000 and in the worst case even down to 20,000 in the coming months. So, we reiterate that as the Nifty moves up from here, more caution is needed rather than becoming overly bullish.
From a long-term perspective, the above-mentioned fall to 21,000-20,000 will be a very good buying opportunity.
Nifty Bank (46,811.75)
Nifty Bank index failed to sustain the break above 47,100 last week. It made a high of 47,363.40 and then has come down from there. The index has closed the week at 46,811.75, up 0.92 per cent.
Short-term view: The near-term outlook is positive as seen from the daily charts. Supports are at 46,400, 46,150 and then around 45,900. Although a dip to test these supports cannot be ruled out, a strong sell-off looks less likely.
A strong bounce from any of the above-mentioned supports can take the Nifty Bank index up to 47,100 again. A break above 47,100 can take the index up to 47,500. The price action, thereafter, will need a close watch.
A sustained break above 47,500 will be bullish. Such a break can take the Nifty Bank index up to 49,000-49,500 in the coming weeks. But a reversal from around 47,500 can drag the index down to 46,000 and lower again.
The rise to 47,500 mentioned above will get negated if the index remains below 47,100 and breaks below 45,900 from here itself. In that case, a fall to 45,000-44,500 can be seen.
Chart Source: MetaStock
Medium-term view: As seen from the monthly candles, 44,400-48,650 has been the trading range since December last year. This sideways consolidation can continue for some more time with some chances of seeing an extended rise up to 49,000-49,500. A fall thereafter will be limited to 44,500 for now.
From a long-term perspective, the region around 44,000 is a very strong support. So, any fall below 45,000 will be a very good buying opportunity. As long as the Nifty Bank index sustains above 44,000, the outlook is bullish to see a rise to 53,000. However, this rise might happen a little later, may be after some more consolidation.
Sensex (73,142.80)
Sensex has risen breaking above the resistance at 72,750 last week. Although a strong follow-through rise was not seen, the index managed well to sustain higher. Sensex closed at 73,142.80, up 0.99 per cent.
Short-term view: The outlook is positive. Supports are at 72,600 and then in the 72,000-71,800 region. Resistance is in the 73,800-73,900 region which can be tested this week. A strong break above 73,900 will be very bullish. Such a break can take the Sensex up to 75,000-76,000 in the short term.
The outlook will turn negative only if the Sensex declines below 71,800. In that case, a fall to 71,000 and even 70,000 can be seen.
Chart Source: MetaStock
Medium-term view: From a big picture perspective, Sensex will gain bullish momentum if it manages to surpass 74,000 decisively. If that happens now, then there is room for the Sensex to touch 78,000 on the upside.
Strong support is in the 70,000-69,000 region. Sensex has to decline below 69,000 in order to become bearish. That looks less likely at the moment.
Dow Jones (39,131.53)
The rise to 39,300 that we have been expecting for some time almost happened last week. After staying stable in the first half of the week, the Dow Jones Industrial Average rose to a high of 39,282.28 on Friday. It has closed the week at 39,131.53, up 1.3 per cent.
Chart Source: MetaStock
Outlook: The Dow Jones is now poised at a very crucial juncture. The region around 39,400 is an important resistance. Whether the index breaks above this resistance or not will decide the next move.
A break above 39,400 will take the Dow Jones up to 40,400. On the other hand, a reversal from around 39,400 could trigger a strong corrective fall to 37,000 or even lower.
Broadly, we see that the Dow Jones is ripe for a correction. But whether that fall is going to happen from 39,400 itself or after an extended rise to 40,400 will have to be seen.
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