Index Outlook: Sensex, Nifty 50: Near-term outlook is positive

Sensex and Nifty 50 sustained higher and were range-bound for most part of the week. On Friday, they broke the range on the upside and rose to close higher. The short-term outlook remains positive for both the Sensex and Nifty. We can expect the index to go up further in the coming days. However, as we have been mentioning over the last couple of weeks, strong resistances are coming up for the indices which can halt the current rally. So, the chances are high for the Nifty and Sensex to run into a correction after some more rise from current levels.

Among the sectors, the BSE IT index outperformed for the second consecutive week. The index was up 3.5 per cent. This was followed by the BSE FMCG index, up 3.34 per cent. The BSE Realty and BSE Metals index underperformed last week. They were down 2.33 per cent and 2.23 per cent respectively.

FPI flows

The foreign portfolio investors (FPIs) continued to buy the Indian equities for the fifth consecutive week. The equity segment saw a net inflow of about $885 million last week. For the month of July, the FPIs have pumped in about $1.83 billion. The consistent inflows from the FPIs can continue aiding the benchmark indices to go further up in the coming days.

Nifty 50 (24,502.15)

Nifty was broadly range bound between 24,150 and 24,450 until Thursday. On Friday, it rose breaking the range on the upside. It has closed the week at 24,502.15, up 0.73 per cent.

Short-term view:  The outlook remains positive. The price action last week indicates the presence of strong buyers in the 24,200-24,150 region. Immediate support can be at 24,350-24,300. Below that, 24,200 and 24,000 are the next strong supports.

Nifty can rise to 24,650-24,700 initially this week. A break above 24,700 can take the index further up to 24,800-24,850 in the short term.

The short-term outlook will turn negative only if the Nifty declines below 24,000. That, in turn, can take the index down to 23,700 and 23,500. But such a fall looks less likely at the moment.

Graph Source: MetaStock

Medium-term view: The region between 24,800 and 24,850 is a significant resistance for the Nifty. We expect this resistance to hold on its first test. We will be looking for a corrective fall from around 24,800-24,850 towards 24,000 or even 23,500 in the coming months. The price action thereafter will need a close watch. In case the Nifty declines further below 23,500, there can be an extended fall to 23,000-22,500.

From a long-term perspective, an eventual break above 24,850 will clear the way for a rally to 27,000 and higher levels. So, the above-mentioned corrective fall to 23,500-23,000 can be a very good buying opportunity from a long-term perspective.

Nifty Bank (52,278.90)

The fall to 52,000 happened last week inline with our expectation. The Nifty Bank index made a low of 51,749.45 and then managed to bounce back from there. It has closed the week at 52,278.90, down 0.72 per cent.

Short-term view: The near-term outlook is slightly unclear. Immediate support is at 52,000. Resistance is at 53,000.

If the Nifty Bank index declines below 52,000 again, it can fall to 51,500 and 51,000. Thereafter, it can bounce back to 52,000 and 52,500.

The level of 53,000 will be very crucial to watch. Nifty Bank index has to breach this level decisively to turn the outlook positive. If that happens, then a rise to 54,500-55,000 can be seen in the short term.

Looking at the price action on the chart, the bias is slightly negative. A fall to 51,500-51,000 can happen first before a fresh rise is seen.

Graph Source: MetaStock

Medium-term view: The region between 51,000 and 50,500 is a strong support. As long as the index stays above this support zone, the outlook will remain bullish. Nifty Bank index can rise to 55,500-56,000 in the coming months. A decisive break above 53,500 can trigger this rise.

The level of 56,000 is a strong resistance that can halt the up-move. We expect the Nifty Bank index to see a corrective fall from around 56,000 towards 53,000 and even 51,000.

Sensex (80,519.34)

Sensex oscillated up and down around 80,000 all through the week. On Friday, it managed to rise well and close above the 80,000-mark at 80,519.34. The index was up 0.65 per cent for the week.

Short-term view: The outlook is bullish. Immediate support is in the 79,500-79,400 region. Below that, 79,000-78,800 is a very strong support. Sensex can rise to 81,500 initially. A break above 81,500 can take the index further up to 82,500 in the short term.

The short-term outlook will turn negative if the Sensex declines below 78,800. If that happens, a fall to 78,000 and even 77,000 can be seen.

Graph Source: MetaStock

Medium-term outlook: As mentioned last week, the region around 82,500 is an important long-term resistance, which may have the potential to halt the current rally. A reversal from around 82,500 can trigger a corrective fall to 78,000-77,000. Such a fall can be a good buying opportunity from a long-term perspective.

Near-term support

Nifty: 24,200 & 24,000

Sensex: 79,400 & 79,000

Nifty Bank: 52,000 & 51,500

Dow Jones (40,000.90)

As expected, the Dow Jones Industrial Average broke above 39,600 and witnessed a rise to 40,200. The index made a high of 40,257.24 and has come down slightly from there. It has closed the week at 40,000.90, up 1.59 per cent for the week.

Graph Source: MetaStock

Outlook: Crucial resistance is in the 40,250-40,300 region. The Dow Jones will have to make a decisive break above 40,300 to continue its up-move. Such a break can take it up to 41,000-41,200 in the next few weeks.

But failure to breach 40,300 and a fall below 39,900 can bring the index under pressure again. In that case, the Dow Jones can fall back to 39,500-39,400 and even lower in the coming weeks. Such a fall will also keep the broad 38,000-40,000 sideways range intact.

Published on July 13, 2024