Sensex, Nifty 50 and the Nifty Bank indices began the week on a weak note with a gap-down open on Monday. However, the benchmark indices managed to bounce back recovering most of the losses. But this rise lacked strength.
The Sensex and Nifty were down little less than a per cent while the Nifty Bank index was down 0.4 per cent. The downward reversal on Friday clearly indicates the inherent weakness in the domestic market. That continues to keep the broader picture weak, and the doors are still open to see more fall. However, we reiterate that strong long-term supports are coming up to halt the fall. So, investors should be ready to enter the market at lower levels rather than going further into the panic mode.
Among the sectors, the BSE Power index outperformed by surging 4.33 per cent. The BSE IT index fell the most. The index was down 5.41 per cent.
Selling spree
The Foreign Portfolio Investors (FPIs) continue to sell the Indian equities. The equity segment saw a net outflow of over $2 billion for the second consecutive week. The FPIs sold about $2.57 billion in the equity segment. For the month of January, the Indian equities have already seen a net outflow of about $5.15 billion so far. FPI selling can continue to keep the Sensex and Nifty under pressure.
Nifty 50 (23,203.20)
Nifty fell sharply on Monday and made a low of 23,047.25. The recovery from this low failed to sustain. The index has turned down again from a high of 23,391.65. Nifty had closed the week at 23,203.20, down 0.97 per cent
Short-term view: The downtrend is intact. Resistance at 23,500 has held very well last week. Support is at 22,850. Nifty can fall to test this support this week. A bounce from around 22,850 can take the index up to 23,150-23,200.
But a break below 22,850 can drag the Nifty down to 22,500-22,400. A fall beyond 22,400 is less likely.
Medium-term view: The region between 22,500 and 22,400 is a strong long-term support. We expect the current fall to halt here. In case a break below 22,400 happens, the downside can extend to 22,000 and not more than that.
A reversal from around 22,500 can take the Nifty up to 25,000-26,000 initially. That will mark the resumption of the long-term uptrend. It will have the potential to target 28,000-28,500 on the upside this year.
So, as the Nifty falls to 22,500, do not panic. Consider that as a buying opportunity,
Nifty Bank (48,540.60)
The support at 47,950 has held well last week. Nifty Bank index touched a low of 47,898.35 and then reversed sharply recovering all the loss. However, the index failed to sustain higher and turned down again on Friday giving away the gains. Nifty Bank index has closed the week at 48,540.60, down 0.4 per cent.
Short-term view: Failure to sustain the bounce keeps the broader view negative. Nifty Bank index now looks vulnerable to break the support at 48,000 decisively. Such a break can take the index down to 47,000-46,800 in the short term.
After this fall, there are good chances to see a reversal towards 49,000-49,500. The price action in the 47,000-46,800 region will need a close watch.
Medium-term view: The region between 47,000-46,800 is a crucial support. Nifty Bank index has to sustain above this support zone to avoid more fall.
A bounce from this support zone can take the index up to 49,000-49,500 as mentioned. From a big picture, the index has to surpass 50,000 decisively in order to turn the sentiment positive. Ideally, the Nifty Bank index has to rise above 51,000 to turn the outlook convincingly bullish again.
In case the index declines below 46,800, a steeper fall to 44,000 will come into the picture.
Sensex (76,619.33)
Sensex failed to get a strong follow-through rise above 77,000 last week. The index rose to a high of 77,319.50 and then fell sharply on Friday giving away all the gains. Sensex has closed the week at 76,619.33, down 0.98 per cent.
Short-term view: The outlook is negative. Support at 76,000-75,900 can be tested this week. A break below 75,900 can take the Sensex down to 75,500 and even lower.
In case the Sensex manages to bounce back from around 75,900, it can rise back to 77,000-77,300 again.
Medium-term view: The region around 75,500-75,350 and then 74,500-74,350 are strong supports. We expect the Sensex to reverse higher from either of these two support zones. That leg of upmove will have the potential to take the Sensex up to 90,000 and higher this year.
So, as the Sensex falls to 75,500-74,500, start looking at the market from the buy side rather than becoming overly bearish.
Dow Jones (43,487.43)
Contrary to our expectation to see a fall to 41,500-41,300, the Dow Jones Industrial Average has risen back from around 41,800 itself. Indeed, the index has risen and closed well above the 43,000 mark. The Dow Jones touched a high of 43,653.25 before closing the week at 43,487.43, up 3.7 per cent.
Outlook: The strong bounce from around 41,800 and a decisive close above 43,000 is a positive for the Dow Jones. That has reduced the danger of the fall to 41,300.
Support is now in the 43,000-42,750 region. The chances are high now for the index to revisit 44,000 levels this week.
Looking at the monthly chart, there is broad range of 41,650-45,100 since November last year. This range seems to remain intact now. So, if the Dow continues to sustain above 43,000, then a rise to 45,000 is possible again in the coming weeks.
Market will be closely watching Donald Trump’s inauguration on Monday. We will have to wait and see as what he has in store for the equity markets.
