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Barring the recent correction that has been in place since October, the calendar year 2021 has been another year of stellar performance for the Indian benchmark indices. The Sensex and Nifty 50 rose to a new high of 62,245.43 and 18,604.45 respectively in October. Thereafter both the indices have come down on the back of the spread of Covid-19 variant Omicron and the US deciding to wind down the stimulus and begin rate hikes much earlier than expected. For the year, the Sensex is up 22 per cent and Nifty is up 24 per cent. India has clearly outperformed the other major Asian indices like Japan’s Nikkei 225 (up 4.9 per cent), China’s Shanghai Composite (up 4.8 per cent) and Korea’s Kospi (up 3.6 per cent).
On the Foreign Portfolio Investors’ (FPIs) front, the Indian equity segment saw an inflow of $5.61 billion in 2021. However, December has seen a huge outflow of $2.52 billion, the highest since March 2020. A further sell-off by the FPIs getting into 2022 can keep the indices under pressure.
Now, what is there on the plate for the Sensex and Nifty 50 in 2022? We see what the charts say on that.
2022 Outlook
Nifty 50 (17,354.05): The current trend is down and this is likely to remain intact as we progress into 2022. Immediate resistance is at 17,450. Next important resistances are at 17,700 and 18,000. As long as the Nifty remains below 18,000, the outlook is bearish. A break below 17,000 can trigger a fresh fall to 16,000-15,500 initially. A corrective bounce to 16,500-17,000 thereafter cannot be ruled out. However, an eventual break below 15,500 will see a steeper fall to 14,500 and even 13,500-13,000 possibly by the third quarter of 2022.
We expect Nifty to find a bottom anywhere in the broad 14,500-13,000 region, preferably around 13,500. As such, Nifty can begin a fresh leg of rally in the final quarter of 2022. If so, it can end the year around 15,000 levels, down about in the range of 10-15 per cent for the year.
However, it is important to note that in the 14,500-13,000 region one has to turn a buyer rather than becoming more bearish.
So, the strategy for the year will be, start buying around 14,500, say, for 30 per cent first. Accumulate another 50 per cent around 13,500 and balance 20 per cent at 13,000.
To negate the fall to 13,500-13,000, Nifty has to sustain above 16,000-15,500 just now and see a strong break above 18,000 from here. This has to happen in the first quarter of 2022, which will then pave the way for a test of 19,500-20,000 levels in 2022.
Sensex (58,253.82): The current trend is down. Strong resistances are at 59,000 and 60,000. As long as the Sensex stays below 60,000, the outlook is bearish. Immediate support is in the broad 56,000-55,000 region. A break below 55,000 can drag the Sensex down to 52,000. A corrective bounce from 52,000 towards 54,000-55,000 cannot be ruled out. However, the trend will continue to remain down. An eventual break below 55,000 will see the Sensex tumbling towards 48,000 and even 46,000 in the third quarter of 2022.
We expect Sensex to bottom anywhere between 48,000 and 46,000 and then see a bounce-back in the final quarter of 2022. It can end the year in the 50,000-52,000 region.
Though 2022 can be a negative year, the fall to 48,000-46,000 will be a good buying opportunity. Long-term investors should start buying, say, 40 per cent at 48,000. Accumulate another 40 per cent at 47,000 and balance 20 per cent at 46,000.
Similar to the Nifty, one has to approach the Sensex from the buy side in the 48,000-46,000 region rather than becoming extremely bearish.
To negate the steeper fall to 48,000-46,000 mentioned above, Sensex has to sustain above 55,000-54,000 in the coming months. Also, it has to rise past 60,000 decisively to bring back the bullishness into the picture.
Nifty Bank (35,481.7): The recent bounce-back move can face strong resistance in the 35,750-36,000 region. Above this the next strong resistance is at 36,800. We can expect the Nifty Bank index to reverse either from 36,000 itself or from near 36,800. That reversal will keep the current downtrend intact and drag the index down to 32,500-32,000 in the coming months. A break below 32,000 seems difficult as of now. As such investors should be looking to buy the Nifty Bank at 32,000. In case the index breaks below 32,000, though less likely, it can fall to 30,000.
Dow Jones Industrial Average (36,338.3): On the charts, the Dow is not looking as weak as the Indian indices. Strong supports are at 34,000 and then 33,000. Only a decisive break below 33,000 will bring the index under pressure. Even in that case the fall could be limited to 31,000-30,000. On the upside, 37,000 is a good resistance now. Broadly, 34,000-37,000 or 33,000-37,000 can be the range of trade at least for the first quarter of 2022 for the Dow.
Take away
Nifty to remain below 18,000 and fall to 14,500-13,000. Start looking at the market from the buy side in the 14,500-13,000 region.
Sensex to remain below 59,000-60,000 and see a fall to 48,000-46,000. Thereafter a fresh leg of long-term rally can unfold.
Nifty Bank can find a bottom around 32,000 and then see a fresh rally.
Dow Jones has strong supports at 34,000 and 33,000 and can outperform the Sensex and Nifty in 2022.
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