Index Outlook: Nifty 50, Sensex: Crucial resistance ahead

Nifty 50 and Sensex continue to move up. The jitters and the fall on Thursday after the US Federal Reserve meeting outcome was short-lived. The benchmark indices witnessed a strong recovery on Friday and closed the week on a strong note. However, the Nifty Bank index seems to be struggling to gain momentum. Although the index has recovered well on Friday after falling over a per cent on Thursday, the index is not looking as strong as the Nifty and Sensex. It is important for the Nifty Bank index to get a strong follow-through rise on Monday to ease the downside pressure.

Among the sectors, barring the banking all others ended the week in green. The BSE Bankex index was down 0.38 per cent. The BSE Realty and BSE Healthcare indices outperformed by surging 3.9 and 3.66 per cent respectively.

FPIs buy

The foreign portfolio investors (FPIs) bought the Indian equities for the eighth consecutive week. The equity segment saw an inflow of $804 million last week. The month of June has seen a net inflow of about $1.99 billion so far. Foreign money inflows will continue to support in keeping the long-term bullish outlook intact for the Indian equity markets.

Nifty (18,826)

The rise to 18,800 happened last week in line with our expectation. After opening the week on a mixed and sluggish note on Monday, Nifty gained momentum. The support at 18,500-18,450 mentioned last week held very well as expected. Nifty made a low of 18,559.75 on Monday and then rose sharply. The index has closed the week at 18,826, up 1.41 per cent.

Short-term view: The short-term view remains positive. Supports are at 18,700, 18,635 and 18,550. We expect the Nifty to sustain above 18,700 itself. A rise to 18,950 can be seen initially. A break above 18,950 can then take the Nifty up to 19,000-19,100.

Important to note is that this 19,000-19,100 is a key short-term resistance zone. As such, chances of the current upmove pausing here are high; as also seeing a corrective fall, going forward.

Graph Source: MetaStock

Medium-term outlook: The broader picture remains bullish. As such, the corrective fall from the 19,000-19,100 resistance zone mentioned above could be short-lived. The fall can find support in the 18,600-18,500 region. After testing this support zone, we can expect a fresh leg of rally. That upmove will have the potential to breach 19,100 and take the Nifty up to 20,000-20,200 and even 20,500 in the coming months.

In case Nifty breaks below 18,500, the corrective fall can extend up to 18,200. However, the broader trend will continue to remain up. In such a scenario, the rally to 20,000-levels will get delayed and can begin from around 18,200.

Sensex (63,384.58)

After failing to breach 63,000 decisively over the past two weeks, Sensex has made a strong close above it last week. The index rose to a high of 63,520.36 on Friday before closing the week at 63,384.58. Sensex is up 1.21 per cent for the week.

Short-term view: The immediate outlook is bullish. Immediate support is at 63,000. Below that 62,600 and 62,350 are the next strong supports. We expect the index to stay above 63,000 this week. Sensex can rise to 64,000-64,300 in the near term.

The region around 64,300 is a strong resistance which can cap the upside for the short term. A corrective fall from there to 62,500 is a possibility.

Graph Source: MetaStock

Medium-term view: The big picture is positive. Strong support is around 62,500. So, the corrective fall can end at this support. Thereafter the overall uptrend can resume. That leg of upmove can breach 64,300 and take the Sensex up to 67,500-68,000 in the coming months.

If a break below 62,500 is seen, the corrective fall can extend up to 61,000 or even 60,500. But that will not change the structure of the charts. The rally to 67,500-68,000 in this case will then begin from around 61,000-60,500.

Nifty Bank (43,939.15)

It was a volatile week for the Nifty Bank index. It was stable oscillating around 44,000 in the first half of the week. But on Thursday, the index witnessed a strong sell-off threatening a steep fall. However, it has managed to recover well on Friday, thereby easing the downside pressure. The index has closed the week at 43,939.15, down 0.11 per cent.

Short-term view: The short-term picture is not convincingly very strong. Important support is at 43,700. Key resistances are at 44,250 and 44,450. Nifty Bank index has to sustain above 43,700 and then rise past 44,450 to turn the outlook bullish convincingly. Only in that case, the rise to 45,000 and 45,500 will come back into the picture.

Failure to breach 44,450 can keep the index in a range of 43,700-44,450. A break below 43,700 can increase the downside pressure and drag it to 43,000 and lower.

Graph Source: MetaStock

Medium-term view: The medium-term outlook is bullish. We retain our view of seeing a rise to 47,000-48,000 in the coming months. A break above 45,500 can trigger this rise.  Strong support is at 43,000 and 42,000. As long as the Nifty Bank index stays above 42,000, there is no threat for the bullish view.

Resistance to watch

19,100 on the Nifty

64,300 on the Sensex

35,500 on the Dow Jones

Dow Jones (34,299.12)

The Dow Jones Industrial Average (34,299.12) fell sharply on Wednesday giving back all the gains made earlier during the week. The outcome of the US Federal Reserve keeping the doors open for more rates hikes for this year triggered this fall. However, the index clawed back on Thursday recovering all the loss. The Dow Jones made a high of 34,588.68 on Friday and fell back to close the week at 34,299.12, up 1. 25 per cent.

Graph Source: MetaStock

The outlook is bullish. Supports are at 34,200 and 34,000. The resistance at 34,500 is holding as of now. But if the Dow manages to sustain above 34,000, it can break 34,500. Such a break can take the Dow Jones up to 35,500 in the coming weeks.

A break below 34,000, though less likely, if seen, can drag the index down to 33,700.

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