Index Outlook: Sensex, Nifty 50 struggle to seek a direction

Nifty 50 and Sensex continue to remain in a sideways range for the fourth consecutive week. The benchmark indices moved up initially but then lost momentum in the second half of the week. Both the indices had come off from their highs giving back some their gains and close the week marginally higher. Nifty was up 0.4 per cent and Sensex 0.6 per cent for the week.

The price action over the last two weeks indicates indecisiveness in the market. It also reflects that the market needs some strong trigger to breakout of the current range on either side. The events that can possibly provide the triggers for the breakout could be the upcoming Union Budget and the US Federal Reserve meeting, both scheduled next week on February 1. In the absence of any other unexpected events, the Sensex and Nifty can continue to remain in the current range atleast until the Union Budget next week.

Among the sectors, the BSE Power and BSE Capital Goods indices closed over 2 per cent for the week. The BSE Consumer Durables and BSE Auto indices under performed last week. They were down 1.66 and 1.07 per cent.

Sell-off slows down

The foreign portfolio investors (FPIs) were net sellers of the Indian equities for the fourth consecutive week. However, the pace of selling seems to have slowed down. The net selling for last week is just $21 million as compared to the $1.12-billion sell-off witnessed the week earlier. For the month of January, the FPIs have pulled out $1.85 billion from the equity segment.

Nifty 50 (18,027.65)

Nifty opened the week on a positive note. It rose to a high of 18,183.75, but had come off from there giving back some of the gains. The index has closed the week at 18,0275.65, up 0.4 per cent.

The week ahead: The near-term outlook is unclear. The weekly candles reflect indecisiveness in the market. 17,775-18,265 can continue to remain as the broad trading range in the short term. Within this range intermediate support is at 17,930-17,900. If Nifty breaks below 17,900, it can fall to 17,800-17,775 this week.

Resistances are at 18,130-18,150, 18,225 and 18,265. A decisive daily close above 18,265 is necessarily needed to take the Nifty up to 18,500-18,550 in the short term.

Graph Source: MetaStock

Medium-term outlook: The bigger picture is bullish. Strong supports are at 17,600 and then at 17,400. The downside could be limited to 17,400 incase the Nifty breaks below 17,775. So a fall to 17,600 or 17,400, if seen, will be a good buying opportunity from a long-term perspective.

The level of 18,550 is a key resistance to watch now. We expect the Nifty to sustain above 17,400 and break 18,550 eventually in the coming weeks. Such a break can take the Nifty up to 19,800-20,200 over the medium term.

Sensex (60,621.77)

Sensex broke above 61,000 initially last week, but failed to sustain. The index made a high of 61,110.25 and had come off from there to close the week at 60,621.77, up 0.6 per cent.

The week ahead: The near-term outlook is not clear. Broadly, 59,500-61,400 can be the short-term trading range. A breakout on either side of this range will determine the next leg of move.

Immediate support is at 60,575 – the 21-Day Moving Average (MA). Below that the 100-Day MA support is at 60,290. A break below these supports can drag the Sensex down to 59,600-59,500.

If the Sensex manages to sustain above the 21-Day MA support (60,575), a rise to 61,400 – the upper end of the range is possible this week. A decisive break above 61,400 if seen, can take the Sensex up to 62,000-62,200 in the short term.

Graph Source: MetaStock

Medium-term outlook: The long-term picture remains positive. 59,000-58,500 and then 57,500 are strong support. The chances are high for the downside to be limited to the first support zone of 59,000-58,500 itself. As long as the index sustains above 58,500, the outlook is bullish to break the 62,000-62,200 resistance zone. Such a break will see the Sensex targeting 65,500-66,000 in the coming months.

Possible range

17,775 – 18,265 on the Nifty

59,500 – 61,400 on the Sensex

41,000 – 44,000 on the Nifty Bank

Nifty Bank (42,506.80)

The support at 41,800-41,700 on the Nifty Bank index mentioned last week is holding well. The index made a low of 41,861.10 and has risen back gradually. It has closed at 42,506.80, up 0.32 per cent for the week.

The price action on the charts indicates that the Nifty Bank index is getting strong support below 42,000. This leaves the bias positive for the near term. The region between 42,000 and 41,800 can continue to act as a strong support and limit the downside.

Immediate resistance is at 43,000. The chances are high for the Nifty Bank index to break 43,000 and rise to 44,000-44,500 in the short term.

Graph Source: MetaStock

The medium-term outlook is also bullish. Nifty Bank index can break 44,000-44,500 and rise to 46,000-46,500 in the medium-term. That will also keep the long-term bullish outlook intact to see 48,000 and higher level going forward.

Dow Jones (33,375.49)

The Dow Jones Industrial Average snapped its two-week rally last week. The index fell sharply about 4 per cent intraweek to make a low of 32,948.93. It has managed to bounce slightly from this low on Friday and close the week at 33,375.49, down 2.7 per cent.

Key resistance will now be at 33,800-34,000. The Dow Jones will now have to rise past 34,000 decisively to ease the downside pressure and negate any further fall. Failure to rise past 34,000 from here can continue to keep the index under pressure. In that case, more fall towards 32,500 or 31,700 is possible in the next few weeks. Thereafter the Dow Jones can reverse higher again and see a fresh rally targeting 34,500 and 35,500 on the upside.

COMMENT NOW