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The Indian benchmark indices were stuck in a sideways range last week. Both the Sensex and Nifty 50 oscillated between their 200- and 100-Day Moving Average (DMA) support and resistance respectively. This has left the immediate outlook mixed for both the indices. Sensex has closed at 57,362.2, down 0.87 per cent and Nifty at 17,153, down 0.78 per cent.
On the charts there is equal chance for the Sensex and Nifty to either break above the 100-DMA resistance and move up or fall breaking below the 200-DMA support from here. As such, we will have to wait for the indices to break the current range on either side to get a clear cue on the next direction of move.
Among the sectoral indices, some closed in green and some in red. The BSE Metal Index outperformed others by surging 5.48 per cent last week. The BSE Consumer Durables index, down 4.34 per cent, was beaten down the most.
Foreign Portfolio Investors (FPIs) have turned net buyers of Indian equities (on a weekly basis) for the first time since the second week of January. They bought $70.95 million in the equity segment last week. However, for the month of March, FPIs remain net sellers. There has been a total outflow of $5.44 billion in the Indian equity segment for the month of March so far. The FPIs will have to buy aggressively to support the Sensex and Nifty to break their current range on the upside and resume the rally.
Nifty 50 (17,153)
Barring the short-lived rise to 17,442.4 on Wednesday, Nifty 50 was broadly stuck in between 17,000 and 17,350 last week. The index has closed at 17,153, down 0.78 per cent for the week.
The week ahead: The 200-DMA support is at 17,036 and the 100-DMA resistance is at 17,340. Broadly, 17,000-17,400 can be the possible trading range. A breakout on either side of 17,000-17,400 will determine whether Nifty can resume the short-term upmove from here or will see a fresh fall.
A sustained break and close above 17,400 will be bullish. Such a break will be bullish and can take the Nifty up to 17,800 initially. A further break above 17,800 will then pave the wayto test 18,100-18,200 on the upside.
On the other hand, Nifty can come under renewed pressure if it breaks below 17,000. In that case a fall to 16.750-16,700 can be seen initially. A break below 16,700 can drag it further down to 16,500 in the short term.
Medium-term outlook: Our overall bearish view has not been negated yet. However, for the selling to intensify, Nifty will have to fall below 16,500. In that case, our bearish view of seeing 15,500 and then 14,500-13,000 will come back into play decisively.
Also as mentioned last week, if Nifty rallies to 18,000-18,200 from here, then reverses lower again, then fall can be limited to 15,500-15,000 itself. In that case the chances of a steeper fall to 14,500-13,000 will get reduced.
Nifty will have to breach 18,200 to negate the bearish view completely and turn bullish.
Trading strategy: Stay out of the market. Wait for the 17,000-17,400 range to break on either side and then take trades accordingly.
Sensex (57,362.2)
Sensex broke above 58,000 on Wednesday but failed to sustain. It made a high of 58,416.56 and had come off from there. Barring this rise, the index was stuck in between the 100- and 200-Day Moving Average (DMA) resistance and support respectively. Sensex has closed the week at 57,362.2, down 0.87 per cent.
The week ahead: Near-term outlook is mixed. The sideways range can continue to remain intact for some time. 57,000-58,500 is the possible trading range. A breakout on either side of 57,000-58,500 will determine the next direction of move.
A decisive close above 58,000 and a subsequent rise past 58,500 will be very bullish. That will ease the downside pressure. In that case, Sensex can rise to 60,800-61,000 in the coming weeks.
On the other hand, a downside break below 57,000 will bring renewed pressure. Such a break can drag the index down to 56,000 initially and then even to 55,350-55,000 eventually.
Medium-term outlook: A downside break of the current 57,000-58,500 range will keep intact our broader bearish view. Crucial support to watch will be at 55,000. A break below it can drag the Sensex down to 52,000-51,000. It will also keep alive the danger of seeing a steeper fall to 48,000-46,000.
But, if Sensex rallies to 61,000 from here, the danger of seeing 48,000-46,000 will reduce. A reversal from 61,000 can keep the downside limited to 52,000-51,000 or 50,000.
So, overall, the bearish view remains intact. The question now is whether the downside will be restricted to 50,000 or go down further to 48,000-46,000.
Only a strong rise past 61,000 will negate the bearish view and turn the outlook bullish.
Nifty Bank (35,410.10)
The 21-Week Moving Average (WMA) resistance at 36.908 has restricted the Nifty Bank index from rising further. The index made a high of 36,827,6 and had come off from there last week. The index has closed at 35,410.10, down 2.8 per cent for the week.
Immediate support is at 35,276 – the 21-Day Moving Average (DMA). A break below it can drag the Nifty Bank index down to 34,800 and 34,500 initially. Such a break will also keep the chances high of the index testing 34,000 level on the downside in a week or two.
The level of 34,000 is a crucial support from a short-term perspective. A break below it will intensify the selling pressure. Such a break can drag the Nifty Bank index lower to 32,000-31,500 over the medium term.
Clusters of support are poised in the 36,700-37,000 region. A strong rise past 37,000 is necessarily needed to ease the downside pressure and see a rise to 38,000. For this rise to happen, the Nifty Bank index will have to bounce either from the 21-DMA or 34,800-34,500. Else a fall to 34,000 cannot be avoided.
Trading strategy: Traders with high risk appetite can consider taking short positions. Go short at current levels. Accumulate shorts on a rise at 35,950 and 36,450. The average entry level will then be at 35,937. Keep the stop-loss at 37,120. Trail the stop-loss down to 35,120 as soon as the index falls to 34,850. Move the stop-loss further down to 34,820 as soon as the Nifty Bank index touches 34,580. Book profits at 34,050
Global cues
The Dow Jones Industrial Average (34,861.24) oscillated up and down around 34,500 all through last week. The immediate outlook is mixed. A crucial resistance is at 35,100. Whether the Dow manages to break above it or not will be key in deciding the next direction of move. If the Dow manages to breach 35,100 decisively, it will be very bullish. In that case, a fresh rally to 37,500-37,800 is possible.
On the other hand, inability to breach 35,000 can then keep the Dow in the 34,000-35,100 range for some time. The level of 34,000 is a crucial support. A break below it will be bearish to see 33,000-32,500 levels on the downside going forward. Overall, 34,000-35,100 is the possible range of trade for now. A breakout on either side of 34,000-35,100 will decide the next leg of move.
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