Comments
Indian benchmark indices extended their rally for the second consecutive week. Both the Sensex and Nifty 50 have risen back above their 200-Day Moving Average (DMA) as against our expectation. We had expected the 200-DMA on the Sensex and Nifty to cap the upside and trigger a fresh fall. The US Federal Reserve raising the rates by 25 basis points and hinting at six more rate hikes this year did not have any negative impact on equities. The benchmark indices are poised just below a crucial resistance. A strong rise past the upcoming hurdle can negate our medium-term bearish view.
Foreign Portfolio Investors (FPIs) remained net sellers on Indian equities. However, the quantum of selling was very less as compared to the previous three weeks. The FPIs sold $119.27 million last week. Thus, the total outflow for the month of March so far in the equity segment stands at $5.513 billion. January and February saw an outflow of $4.7 billion each.
Nifty 50 (17,287.05)
Nifty 50 rose for the second consecutive week. The 200-DMA at 16,997 was capping the upside most part of the week. However, on Friday, the index saw a wide gap-up above the 200-DMA and surged to a high of 17,344.6. Nifty has closed the week at 17,287.05, up 3.95 per cent.
The week ahead: Crucial resistances are at 17,348 – the 21-Week Moving Average (WMA) and 17,380 (100-DMA). A break above these hurdles and a subsequent rise past 17,500 will increase the bullish momentum. In that case, Nifty can surge to 18,200 in the short term.
On the other hand, if Nifty fails to break above 17,380 – the 100-DMA, and reverses lower, it can move down to test the 200-DMA support at 16,997. A break below the 200-DMA support will bring back the downside pressure and drag it to 16,750 and 16,500 in the coming weeks.
Overall, it is a ‘wait and watch’ situation for now. We will wait to see whether Nifty breaks above the immediate resistance or falls back from here.
Medium-term outlook: Our overall bearish view of seeing 14,000-13,000 is under test now. If Nifty rallies to 18,000-18,200 from here the bearish view will get negated. A further rise past 18,200 will turn the big picture bullish completely.
Nifty has to remain below 17,500 to keep this broader bearish view alive. Important support is around 16,500. A strong break below it is necessarily needed to bring back the bearishness completely into the picture again. Such a break will pave the way for a fresh fall to 16,000-15,500 in the coming weeks. It will also keep alive the chances of seeing 14,500-13,000 on the downside over the medium term.
A second possibility is that Nifty rises to 18,000-18,200 from here but then reverses lower again from around 18,200. Even then there could be a chance of seeing 15,000 on the downside. But in that case the chances of seeing a steeper fall to 14,000-13,000 might get reduced and the downside could be limited to 15,000 itself.
Trading strategy: The stop-loss at 16,780 on the short-positions got hit. Our bearish view has not turned out to be correct. So, we would prefer to stay out of the market for now to get clarity on the direction of move.
Sensex (57,863.93)
The resistance at 57,000 capped the upside for most part of the week. But Sensex broke above this hurdle on Friday and has closed on a strong note. The wide gap-up open on Friday has taken the index well above the 200-Day Moving Average (DMA), which is currently at 56,931. Our view of Sensex remaining below 57,000 and seeing a fall to 53,000-52,000 has been negated. Sensex has closed the week at 57,863.93, up 4.16 per cent.
The week ahead: Sensex has key resistances ahead at 58,148 – the 21-Week Moving Average (WMA) and 58,268 – the 21-DMA. Whether the index manages to break above these hurdles or not will determine the next move. A strong break above 56,268 will boost the bullish momentum. It will also increase the chances of Sensex rising past 59,000, targeting 60,800 on the upside.
On the other hand, if Sensex reverses lower failing to breach the immediate resistances, it can test the 200-DMA support at 56,931 initially. A further break below this support will then increase the downside pressure and drag the index down to 55,200 in the short term.
Medium-term outlook: The rise above the 200-DMA last week has slightly reduced the danger of seeing a steeper fall. Sensex will have to remain below the 100-DMA resistance. Important support is at 55,200. A strong break below it will bring back the bearishness and drag the Sensex down to 52,000-51,000 in the coming weeks. That, in turn, will keep alive our broader bearish view of seeing 48,000-46,000 on the downside in the coming months.
In case the Sensex rallies towards 60,000, it will have to be seen if it can rise past 61,000 or not. A pull-back from the 60,000-61,000 region can still keep the chances of revisiting 52,000 levels on the downside. But in that case, the probability of seeing 48,000-46,000 will get reduced.
Nifty Bank (36,428.55)
The resistance at 35,000-36,000 failed to cap the upside in the Nifty Bank index as against our expectation. The index has risen past 36,000 contrary to our expectation to see a reversal. It has closed for the week at 36,428.55, up 5.45 per cent.
Though there is room to see further rise from here, the upside is likely to be capped. Key resistances are at 37,085 and then at 38,350-38,400. The chances are high for the Nifty Bank index to reverse lower from the 38,350-38,400 region again. Such a reversal can drag the index down to 32,000-31,000 over the medium term.
Trading strategy: The stop-loss at 35,700 on the short positions taken at an average of 34,664 has been hit. We prefer to stay out of the market for now.
Global cues
The Dow Jones Industrial Average (34,754.93) has surged, snapping the five-week fall. The index surged 5.5 per cent last week thereby recovering most of the loss made in the last five weeks. Series of resistances are coming up at 34,975, 35,115 and 35,165. The Dow will have to breach these resistances decisively to retain the bullish momentum and rise further. A decisive break above 35,165 will be bullish to see 37,000-37,500 on the upside. On the other hand, a pull-back from any of the resistances mentioned above and a subsequent fall below 34,000 can bring the Dow under pressure again to revisit 33,000-32,500 levels.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.