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The collapse of the Silicon Valley Bank in the US has sent a shock wave across the global equity markets. The Dow Jones Industrial Average had tumbled over 4 per cent last week and has closed on a weak note. On the domestic front, the Sensex and Nifty 50 are down just over a per cent each.
The strong fall in the second half last week has reduced the hope of a reversal in the Sensex and Nifty. For the next few weeks, the movement in the Dow Jones will need a close watch. That would have a major influence in the other global equity markets.
The sectoral indices’ performance was mixed last week. The BSE Realty and BSE Bankex fell the most and were down 3.37 and 1.88 per cent respectively. The BSE Power and BSE Oil&Gas indices outperformed. These indices were up 5.96 and 2.2 per cent last week.
Watch the FPIs
The Foreign Portfolio Investors (FPIs) were net buyers of the Indian equities. They have bought $560 million in the equity segment last week. It is important to see how the flows appear next week. If the FPIs does not sell more and continue to buy, then it would be a positive signal. That will indicate that the FPIs are buying the dips in the Indian market. So the FPI action for the next couple of weeks will need a close watch.
Nifty 50 (17,412.90)
As expected, Nifty broke the resistance at 17,710 and rose to test 17,800 last week. However, the index reversed sharply lower giving back all the gains in the second half of the week. Nifty fell to a low of 17,324.35 on Friday before closing the week at 17,412.90, down 1.03 per cent.
The week ahead: The short-term outlook is negative. Immediate support is at 17,300. A break below it can take the Nifty down to 17,200-17,150 and even 17,000. The fall extending even up to 16,900-16,850 is also a possibility.
The 17,000-16,850 region is a very crucial support zone. The price action there will need a close watch to see if the Nifty manages to bounce back or not.
Resistance is around 17,600. A break above it will ease the downside pressure. Such a break can take the Nifty up to 17,800-17,850 this week.
Graph Source: MetaStock
Medium-term outlook: The support clusters poised in the broad 17,300-16,850 region will be very crucial to watch from a medium-term perspective. If the Nifty manages to sustain above this support zone, it will keep the medium-term bullish outlook alive.
But a break below 16,850 will turn the outlook bearish. In that case, a fall to 16,500-16,000 can be seen. So, the price action in the coming weeks will need a close watch.
On the upside, 18,000-18,200 will continue to be a key resistance. Nifty has to breach 18,200 decisively to confirm a trend reversal. Only in that case the rally to 19,500-20,000 that we have been expecting for a long time will come into the picture.
Sensex (59,135.13)
Sensex broke above 60,000 but failed to sustain higher. It made a high of 60,498.48 and fell sharply giving back all the gains. Sensex made a low of 58,884.98 on Friday and managed to bounce slightly from there. It has closed the week at 59,135.13, down 1.13 per cent.
The week ahead: Near-term outlook is not looking very weak for the Sensex. There is room to fall further from here. However, there are important supports that can limit the pace of fall.
Immediate support is at 59,000. Below that 58,650-58,600 and then 58,000 are crucial supports to watch. Though a fall even up to 58,000 cannot be ruled out in the near term, a break below 58,000 looks less probable.
As such, we expect the Sensex to bounce back from around 58,000 and rise back to 59,500-60,000 again.
Graph Source: MetaStock
Medium-term view: The level of 58,000 is a strong support for the Sensex. The price action around 58,000 will need a close watch. A strong rise from around 58,000 will keep our overall bullish view intact. That will also be a good buying opportunity from a long-term perspective.
Important resistance is around 61,000. The bullish reversal will get confirmed on a sustained break above this hurdle. That break will open the doors for our target of 64,000 and 66,000.
The outlook will turn bearish if the Sensex declines below 58,000. In that case, 57,000 and even lower levels can be tested.
Nifty Bank (40,485.45)
Nifty Bank index sustained higher in the first half of the week, but failed to get a strong follow-through rise. The index made a high of 41,671.20 and tumbled over 3 per cent from there to make a low of 40,341.70 on Friday. Nifty Bank index has closed at 40,485.45, down 1.86 per cent for the week.
The immediate outlook is weak. Resistances are at 40,900 and then 41,200. Nifty Bank index can fall further and test 40,000-39,800 and even 39,500. A strong bounce from around 39,500 will keep the broader 39,500-42,000 range intact. In that case, the Nifty Bank index can rise to 41,000-42,000 levels again.
Graph Source: MetaStock
But if the Nifty Bank index breaks below 39,500, the downside pressure will increase. Such a break can drag it down to 38,000 and even lower in the coming week. As such, the price action in the 40,000-39,500 region will need a close watch this week.
Dow Jones (31,909.64)
The Dow Jones Industrial Average was beaten down badly last week. The index has tumbled breaking below the key 33,000-32,500 support zone. It has closed the week at 31,909.64, down 4.4 per cent for the week.
Graph Source: MetaStock
The short-term outlook is bearish. Immediate resistance is at 32,000. Above that, 32,400 and 32,700 are the next significant hurdles. The Dow Jones can fall to 31,000 in the coming days. The price action thereafter will need a close watch to see if the Dow is reversing higher or not.
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