Index Outlook: Sensex, Nifty 50 have more room to rise

Sensex and Nifty 50 have resumed their upmove after witnessing a minor correction last week. As expected, there was a short-lived correction in both the indices in the initial part of last week. However, the mentioned supports at 18,100 on the Nifty and 61,000 on the Sensex limited the downside very well in line with our expectation. Both Sensex and Nifty 50 have closed over a per cent each last week.

Among the sectors, barring the BSE Power (down 2.14 per cent) and BSE Realty (down 0.87 per cent), other indices closed in green last week. The BSE PSU index rose the most. The index was up 2.82 per cent. It was followed by the BSE IT and BSE Oil & Gas indices, which were up 1.9 and 1.84 per cent respectively.

FPIs buy

The Foreign Portfolio Investors (FPIs) continue to buy the Indian equities. They bought $152 million last week. So far, the month of November has seen an inflow of $3.86 billion into the Indian equity segment. Continuing flows will help to limit the downside in the benchmark indices. As such, they can aid in pushing the Sensex and Nifty further higher from here.

Nifty 50 (18,512.75)

The support at 18,100 mentioned last week has held very well as expected. Nifty made low of 18,133.35 and then rose back sharply recovering all the loss made initially during the week. The index made a high of 18,534.90 before closing the week at 18,512.75, up 1.12 per cent.

The week ahead: The near-term outlook is positive. Immediate support is in the 18,450-18,400 region. Below that 18,200 – the 21-Day Moving Average, will be the next strong support for the week.

Immediate resistance is at 18,550. A break above it can take the Nifty higher to 18,900 and 19,000 this week.

Graph Source: MetaStock

Medium-term outlook: The medium-term outlook is bullish. Strong support is in the 18,000-17,800 region. The chances are high that Nifty can remain above 18,000 itself, going forward. As such the current upmove has potential to take the Nifty up to 19,500 and 19,700 in the coming weeks.

Also from a long-term perspective, Nifty can target 20,500 in the coming months.

Trading strategy: We had suggested to go long at 18,350 a couple of weeks ago. The order to accumulate at 18,150 would also have been triggered last week. So the average entry level will now be at 18,250. The stop-loss can be moved up to 17,400 from 17,200 now. Trail the stop-loss up to 18,600 as soon as the index moves up to 19,100. Move the stop-loss further up to 19,100 when the index rallies to 19,950. Book profits at 20,100. Please note that we had suggested this trade for a minimum holding period of three months.

Sensex (62,293.64)

The fall in the first couple of days of the week found support near the psychological 61,000-mark. Sensex rose back sharply from the low of 61,059.33 recovering all the loss. The index made a high of 62,447.73 before closing the week at 62,293.64, up 1.02 per cent.

The week ahead: The outlook is bullish. Immediate support is in the 62,050-62,000 region. Below that, 61,400 and 61,250 are the next important supports. Immediate resistance is at 62,700. A break above it will open the doors for the Sensex to test 63,800-64,000 in the near term.

The level of 60,600 is an important short-term support. The Sensex will come under pressure only if it breaks below 60,600. In that case, a fall to 59,500 is possible. But such a strong fall is less probable.

Graph Source: MetaStock

Medium-term outlook: The bigger picture is bullish. Strong support is in the 59,500-59,000 region. We see the Sensex rallying to 66,000 in the coming months. Intermediate resistance is at 64,000. A corrective fall from 64,000 to 63,000 is a possibility. After that, a fresh rise from 63,000 can break 64,000 and take the Sensex up to 66,000 over the medium term.

This bullish outlook will get negated only if the Sensex falls below 59,000. But that looks unlikely as seen from the charts.

Nifty Bank (42,983.95)

The Nifty Bank index is continuing to move up gradually. The index sustained well above 42,000 and broke above 42,500 in line with our expectation. A test of 43,300 on the upside has also happened last week as expected. Nifty Bank index made a high of 43,339.15 on Friday and has come off from there. It has closed at 42,983.95, up 1.29 per cent for the week.

Graph Source: MetaStock

The outlook is bullish. Immediate support is at 42,600 and 42,500. Below that, 42,000-41,950 is the next strong support zone. The chances are high for the Nifty Bank index to sustain above the 42,600-42,500 support itself. A gradual rise to 44,000 can be seen this week.

From a medium-term perspective, the Nifty Bank index is expected to target 45,000, going forward.

Short-term targets

19,000 on the Nifty

64,000 on the Sensex

35,000 on the Dow Jones

Global cues

The Dow Jones Industrial Average (34,347.03) has risen breaking above 34,000 as expected last week. The index made a high of 34,386.51 for the week. The Dow Jones has closed the week on a strong note at 34,347.03, up 1.78 per cent for the week.

Graph Source: MetaStock

The outlook remains bullish. A further rise to 34,800 and 35,000 is possible in the near term. However, the level of 35,000 is a strong resistance which can halt the current rally. As such, a corrective fall from 35,000 towards 33,500 cannot be ruled out.

Also, the failure to breach 35,000 immediately can keep the Dow in a range of 33,500-35,000 for some time.

However, the bigger picture will continue to remain bullish. We expect the Dow to breach 35,000 if not immediately, but eventually in the coming weeks. Such a break will take the Dow Jones higher to 37,500 and 38,000 in the coming months.

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