Index Outlook. Indices at the crossroads

Both the Nifty and Sensex witnessed a gradual up-move last week, amid choppiness in the global markets. However, the US trade talk and geopolitical risks could weigh on the domestic market. Last week, the deepening crisis in Syria triggered a sharp rally in crude prices. The WTI crude oil price has surged 8.5 per cent to close at $67.3 a barrel. Ongoing tensions over Syria could take crude prices to $70 a barrel.

On the domestic front, the rupee weakening against the dollar also needs watching. Major index stocks are set to announce their fourth quarter and full year results in the coming week. Markets could turn choppy as well. Hence, investors need to tread with caution in the ensuing weeks.

Nifty (10,480.6)

 

 

 

 

The Nifty index extended its weekly gains for third week in a row, amid choppiness. The index has advanced 149 points or 1.45 per cent last week.

Short term trend: Key support zone at around 10,000 buttressed the medium-term decline in late March this year. Subsequent upward reversal has taken the index above the 200-day moving average in recent times. Over the past three weeks, the index has been in a near-term uptrend. Although the index has marginally closed above the vital medium-term resistance in the 10,400-10,450 band, it is still considered testing the band.

An emphatic break above this band can strengthen the bullish momentum and take the index northwards to 10,560 and 10,700 in the short term. However, inability to decisively move beyond the resistance zone can see the index entering into a sideways movement in the 9,900-10,450 range for a while.

Immediate supports are placed at 10,300, 10,100 and 10,000. On the other hand, an emphatic downward breakthrough of 9,950 will reinforce the downtrend that commenced from the late January peak of 11,171. Next key supports are at 9,700 and 9,500 levels.

Medium term trend: The medium-term downtrend that began from the January peak is at the crossroads. Failure to rally above the crucial resistances ahead at 10,500 and 10,700 will keep the downtrend still in place.

In such a scenario, the index can decline to re-test the medium-term support zone of 10,100 and 10,000 once again.

Key medium-term supports below 10,000 are at 9,500 and 9,200 for the index. But a strong up-move beyond 10,700 will alter the downtrend. Such a move above can change the downtrend and take the index northwards to new highs. Subsequent medium-term targets are 11,000 and 11,200 levels.

Sensex (34,192.6)

Since taking support at around 32,500 in late March, the Sensex has been on a nascent up-move. The index outshined the Nifty last week and gained 1.7 per cent or 565 points.

Though the index managed to close above the 34,000 resistance level, it needs to decisively breakthrough it to strengthen the uptrend.

Such a break can push the index northwards to 34,500 and then to 35,000 in the short to medium term. Having said that, if the index fails to sustain its bullish momentum and reverses from the current resistance levels, it can move down to 33,500 and then to 33,000. Key support below 33,000 is at 32,500.

Medium term trend: An emphatic upward breakthrough of 35,000 can take the Sensex higher to 35,400 and 35,800 levels. Further, rally beyond the crucial resistance zone between 35,800 and 36,000 are required to strengthen the index and take it northwards to 36,500 in the medium to long term. Significant medium-term supports are at 33,400 and 32,500.

Bank Nifty (25,200.6)

Last week, the Bank Nifty continued its up-move by advancing 327 points or 1.3 per cent. The index has managed to close above a key resistance level of 25,000. Now, it faces a trend-deciding zone ahead in the band between 25,500 and 25,700.

A conclusive breach of this barrier can gather bullish momentum and take the index higher to 25,840 and 26,000 levels. Further rally beyond 26,000 can accelerate the Bank Nifty to 26,500 in the medium term. Traders with a short-term perspective should tread with caution as long as the index trades below 25,700.

Consider initiating fresh long positions above 25,700 with a fixed stop-loss. Conversely, if the index tumbles below the immediate support levels of 25,000 and 24,800, it can trend lower to 24,500 and 24,000 in the short term.

Further slump below 24,000 will strengthen the downtrend that has been in place from the January high of 27,652, and pull the index towards 23,605. Subsequent supports below this level are at 23,200 and 23,000.

Global cues

The Dow Jones Industrial Average advanced 437 points or 1.79 per cent to close the week at 24,360 levels. The index tests a vital barrier at 24,500.

A strong breach of this level can take it higher to 24,800 and 25,000 levels in the coming weeks. Inability to move beyond this can keep the index in a sideways band between 23,500 and 24,500 for a while. Key supports are at 24,000 and 23,700 levels.

The Nikkei 225 faces a key resistance ahead at 22,000, which needs to be surpassed to reinforce the bullish momentum. Next targets on a decisive breach will be 22,300 and 22,500. Supports to watch are at 21,500 and 21,150 levels.

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