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The Indian benchmark indices, the Sensex and Nifty 50, are under pressure. The sentiment in the market has turned nervous. As a result, the Sensex and Nifty 50 got beaten down badly last week. Both the indices were down over 2 per cent each. The small- and mid-cap indices were knocked down even badly. The BSE Smallcap and BSE Midcap indices tumbled 7.67 and 5.10 per cent respectively last week.
Interestingly, the fall in the Indian equity indices have come in at a time when the global indices such as the Dow Jones Industrial Average had remained broadly range bound. The Sensex and Nifty have to see a strong bounce from current levels in order to avoid a much steeper fall.
Among the sectors, the BSE Healthcare index managed to stay afloat. The index was up 0.82 per cent for the week. Other sectoral indices ended the week in red. The BSE Power and BSE Realty indices fell the most. They were down 7.96 per cent and 6.68 per cent respectively.
FPIs buy
Despite the fall in the broader indices, the Foreign Portfolio Investors (FPIs) remained net buyers last week. The Indian equity segment saw a net inflow of $121.25 million last week. For December, the net inflow into the Indian equities stands at $1.4 billion.
Nifty 50 (17,806.8)
The Nifty remained broadly in a range of 18,200 and 18,400 initially. But towards the end, the index witnessed a strong sell-off. That had resulted in the Nifty declining below the key 18,000-mark and close on a weak note for the week at 17,806.8, down 2.53 per cent.
The week ahead: Last week, we had said that 18,100-17,800 is a strong support zone. Nifty has closed at this crucial support. It has to bounce back immediately from the current levels to avoid a much steeper fall.
A strong bounce from here can take the Nifty up to 18,000 and 18,200 in the short term. The level of 18,200 is a strong short-term resistance. Nifty has to rise past 18,200 to bring back the bullish momentum.
In case the Nifty fails to bounce from the current levels and fall below 17,800, the downside pressure could increase. In such a scenario, Nifty can fall to 17,650-17,550 initially and then to 17,450-17,400 eventually.
Graph Source: MetaStock
Medium-term outlook: The region between 17,450 and 17,400 is a strong trend support on the chart. From a big picture perspective, the recent fall looks like a correction within the broad uptrend rather than a trend reversal. So, we see high chances for the Nifty to sustain above 17,400 and resume the overall uptrend going forward.
Important intermediate resistance is between 18,400 and 18,600. A strong rise past 18,600 will open doors for a test of 19,400-19,500 over the medium term. It will also keep alive the long-term bullish outlook for seeing 20,500 on the upside.
From a medium-term perspective, 17,000-16,700 is a crucial support zone. Nifty has to decline below this support to become bearish and negate the rise to 19,500 and 20,500 mentioned above.
Trading strategy: The stop-loss at 17,800 on the long position we had taken at 18,250 has been hit. We now suggest staying out of the market for a while.
Sensex (59,845.29)
Sensex was managing to hold above 61,000 in the first half of the week. But towards the end, the index tumbled breaking below 61,000 and extended the fall beyond the psychological 60,000-mark. Sensex has closed the week at 59,845.29, down 2.43 per cent.
The week ahead: The 21-Week Moving Average is poised near the current levels at 59,885. Sensex has to bounce back immediately and also strongly to ease the downside pressure. Also, 61,000 will be a key resistance now. Sensex will have to breach 61,000 decisively to bring back the bullish momentum.
If Sensex fails to bounce back immediately, it can extend the fall to 59,000. This level of 59,000 is a very crucial support that can limit the downside. We expect the Sensex to bounce back from 59,000 and move upto 60,000-61,000, going forward.
Graph Source: MetaStock
Medium-term outlook: The level of 59,000 is a very crucial support for now. In case Sensex breaks below 59,000, it will come under more pressure. Such a break can take the index down to 58,000 and even 57,000 in the coming weeks. That will turn the medium-term bias negative.
But as mentioned above, we expect the Sensex to sustain above 59,000 and see a fresh rally. So, as long as the Sensex remains above 59,000, our overall bullish view of seeing 65,000 and 66,000 on the upside will remain intact.
Nifty Bank (41,668.05)
The Nifty Bank index fell sharply breaking below the key support level of 43,000. We had expected the index to fall up to 42,000 on a break below 43,000. But the index had extended the fall well beyond 42,000. Nifty Bank index had tumbled 3.59 per cent to close the week at 41,668.05.
Graph Source: MetaStock
An immediate support is at 41,500. Below that another strong support is at 41,000-40,850. So the downside could be limited to 40,850, even if the Nifty Bank index extends the fall breaking below 41,500.
We expect the Nifty Bank index either to bounce from the current levels itself towards 43,000 or after an extended fall to 41,000-40,850. Overall, the fall last week has not changed the trend yet. But we will have to wait for the index to find a support and bounce back to resume the overall uptrend.
Global cues
The Dow Jones Industrial Average (33,203.93) fell initially to test the support at 32,500 as expected. The index managed to sustain well above 32,500 all through the week and was broadly range bound. The Dow Jones oscillated up and down between 32,500 and 33,500. It has closed at 33,203.93, up 0.82 per cent for the week.
Graph Source: MetaStock
The immediate outlook is mixed. For now, 32,500 itself is holding very well. As mentioned last week, there is a cluster of support in the 32,500-32,000 region. So, only a fall below 32,000 will bring the Dow Jones under pressure to see a steeper fall. In that case, the Dow can see an extended fall to 31,000-30,500. But the price action on the charts gives a bullish bias. As such the chances are high for the Dow to sustain above 32,500.
Resistance is at 33,570 – the 100-Week Moving Average. A strong break above this resistance will bring back the bullishness into the picture. Such a break will take the Dow up to 35,000 initially and further higher levels eventually.
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