Sensex, Nifty 50 and the Nifty Bank index fell last week in line with our expectation. Nifty and Sensex were down 1.87 per cent and 1.64 per cent respectively. The Nifty Bank index, on the other hand, was beaten down badly and was down 3 per cent last week. As expected, the Dow Jones Industrial Average outperformed the Indian markets. The index surged over 2 per cent last week.

The Dow Jones continues to remain positive and can rise further from here. The Indian benchmark indices are poised near a very crucial support. They have to sustain above it and get a strong follow-through rise from here. Else a much deeper fall can be seen in the coming weeks. As such, the price action this week is going to be very important for the Sensex, Nifty and the Nifty Bank index.

Among the sectors, the BSE FMCG and BSE Auto index outperformed last week. They were up 1.29 per cent and 1.25 per cent respectively. The BSE PSU, BSE Consumer Durables and the BSE Oil & Gas indices were beaten down the most last week. They were down 4.84 per cent, 4.76 per cent and 4.5 per cent respectively.

FPI flows

The foreign portfolio investors (FPIs) continued to sell the Indian equities for the fourth consecutive week. The equity segment saw a net outflow of $2.18 billion last week. The net outflow for the month of May is about $2 billion. If the FPIs continue to sell, then the Sensex and Nifty can see more fall from here.

Nifty 50 (22,055.20)

Nifty fell last week breaking below the key support level of 22,200. The index touched a low of 21,932.40 and then has managed to bounce back slightly from there. It has closed the week at 22,055.20, down 1.87 per cent.

Short-term view: The immediate outlook is slightly mixed. A crucial support is around 21,900. Resistance is at 22,200. A break above it can take the Nifty up to 22,400-22,500 this week. A strong and sustained rise above 22,500 is needed to turn the sentiment positive. Only in that case, Nifty can rise to 22,800 again and will keep alive the chances of seeing 23,000 levels.

Failure to breach 22,200 or 22,500 will continue to keep the index under pressure to break below 21,900. Such a break will increase the selling pressure and will drag the Nifty down to 21,600-21,500 and even 21,000 in the coming weeks.

Graph Source: MetaStock

Graph Source: MetaStock

Medium-term view: The chances of the rise to 23,200 and 23,650 is slowly fading away. It will get completely negated if the Nifty fails to rise above 22,500 and breaks below 21,900 from here itself. If that happens, then the expected corrective fall to 21,000 and even 20,000-19,500 can happen from here itself. 

However, we repeat that from a long-term perspective, the fall to 21,000 and 20,000-19,500 will be a very good buying opportunity.

Nifty Bank (47,421.10)

Nifty Bank index fell below 48,000 as expected. The index tumbled to a low of 47,313.35 and has closed the week at 47,421.10, down 3.07 per cent.

Short-term view: On the charts, the picture is still weak. Although there is an immediate support at 47,200, the upside can be capped. Strong resistance is in the 48,000-48,300 region. The Nifty Bank index has to breach 48,300 to ease the downside pressure. Such a break will open the doors for a rise to 49,500-50,000 again.

But the price action on the charts leaves the bias negative. As such, the upside to be capped at 48,300 for this week. We expect the index to break below 47,200 this week. Such a break can drag the Nifty Bank index down to 46,200-46,000 in the short term. Thereafter, a corrective bounce to 47,000-47,500 is a possibility.

Graph Source: MetaStock

Graph Source: MetaStock

Medium-term view: The big picture remains positive. Strong supports are at 46,000 and 44,500. So, the price action around 46,000 will need a close watch this week. A break below it can see an extended fall to 44,500. Such a fall will be a very good buying opportunity from a long-term perspective.

As long as the Nifty Bank index remains above 44,500, the outlook is bullish to see 52,000 and 53,000 on the upside.

Sensex (72,664.47)

Sensex fell last week as expected. We had expected the index to touch 72,000-71,900. But it made a low of 72,334.18 and has bounced slightly from there. Sensex has closed the week at 72,664.47, down 1.64 per cent.

Short-term view: A very crucial support is at 71,950. Immediate resistance is at 73,100. Above that, 73,750 is the next important resistance. Failure to breach these resistances can keep the Sensex vulnerable to break below 71,950. Such a break can drag it down to 71,000 and 70,500.

Sensex has to rise past 73,750 to avoid the above-mentioned fall and bring back the chances of revisiting 75,000-75,500 levels.

Graph Source: MetaStock

Graph Source: MetaStock

Medium-term view: As mentioned last week, as long as the Sensex stays below 75,000, it looks like the fall to 70,000-69,000 can happen first. A break below 71,900 can trigger that fall. However, from a long-term perspective, such a fall to 69,000 if seen can be a very good buying opportunity.

Crucial Supports
Nifty: 21,900
Sensex: 71,950
Nifty Bank: 47,200
Dow Jones (39,512.84)

The Dow Jones Industrial average remained strong all through the week. The rise to 39,500 has happened in line with our expectation. The index made a high of 39,579.88 before closing the week at 39,512.84, up 2.16 per cent.

Graph Source: MetaStock

Graph Source: MetaStock

Outlook: The view remains bullish. Immediate support is around 39,000. The Dow Jones can rise to 39,900-40,000 from here. The price action thereafter will need a very close watch.

A decisive break above 40,000 can take the index up to 40,200 initially and then even to 40,700 eventually in the coming weeks.

 On the other hand, if the Dow Jones turns down from around 40,000 it can fall back to 39,500 and even 39,000 again. In that case, the chances of revisiting 38,000 will also come back into the picture.

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