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The domestic equity markets witnessed a choppy week. The key benchmark indices — the Sensex and the Nifty 50 — began the week on a positive note, but later turned volatile due to the geo-political tension between India and Pakistan.
Market was range-bound, given the decline in Q3 GDP growth, rising oil prices and the fact that it was a derivatives expiry week. Amid these events, the Sensex and the Nifty closed the week on a positive note.
Besides, mid- and small-cap indices experienced a strong rally; the Nifty Midcap 100 index gained 1.4 per cent, while the Nifty Smallcap 100 jumped 2.7 per cent on Friday.
On the global front, key data points and events such as the US trade balance, ECB rate decision, China trade balance and US non-farm payrolls need to be watched, amid rising oil prices. Investors should tread with caution in the coming truncated week as well.
Nifty 50 (10,863.5)
Last week, the Nifty 50 index climbed 71 points or 0.67 per cent amid volatility. In the truncated week ahead, it can witness a rally on a decisive break above the immediate resistance at 10,900.
Such a break can push the index higher to the upper boundary of the sideways range at 11,100, with a pause at around 11000-mark.
The Nifty index is testing its moving average compression (21-, 50- and 200-day moving averages) at the current levels. A decisive breakthrough of these averages will strengthen the bullish momentum and take the index up.
But inability to move beyond 10,900 could drag the index slightly lower to 10,750 and 10,650 levels.
The lower boundary of the sideways range is at 10,600, which will keep the sideways consolidation phase intact.
But a strong plunge below 10,600 will bring back selling pressure and drag the index down to 10,500 and 10,400 in the short term.
A further fall below the next key base level of 10,400 can drag the index down to the subsequent support levels at 10,300 and the 10,100-10,000 band.
On the other hand, a decisive and strong break-out of 11,100 will alter the downtrend and accelerate the index northwards to 11,300 and 11,500. A further rally above 11,500 can take it up to 11,600 and 11,750.
Medium-term trend: There is no change in the medium-term trend as the index is still range-bound.
As long as the index continues to trade below the key trend-deciding level of 11,100, the medium-term downtrend will be intact. We reiterate that a strong break above this key resistance is required to alter the downtrend and take the index higher to 11,300 and 11,500.
Conversely, a plunge below the key support level of 10,400 will reinforce the bearish momentum. I The index can then decline to 10,000 levels in the medium term. Subsequent key supports are at 9,900, 9,700 and 9,500 levels.
Sensex (36,063.8)
The Sensex managed to close marginally on a positive note despite choppiness last week. It added 192 points or 0.54 per cent. The index has formed a spinning top candlestick pattern in the weekly chart, indicating indecisiveness.
Moreover, it tests the moving average compression at current levels. A strong rally above 36,400 can take the index higher to the next significant resistance level of 37,000 in the short term. Nevertheless, to change the medium-term downtrend, the index has to conclusively break above 37,000. In such a case, the benchmark index can trend upwards to 37,400 and 37,600 over the medium term.
Failure to move beyond 36,400 will keep the index range-bound for a while. Any corrective declines can find support at 35,600 and 35,400 levels. An emphatic downward break below 35,400 can pull the index lower to 35,000.
A further fall below 35,000 can drag the index down to 34,600. Key supports are placed at 34,400 and 34,000.
Nifty Bank (27,043.9)
Last week, the Nifty Bank index advanced 176 points or 0.66 per cent amid volatility. The index continues to test the key resistance at 27,000.
A decisive break above this barrier can take the index higher to 27,300 and 27,500 levels in the short term. Nevertheless, a downward reversal from current levels can find support at 26,650 and 26,500 levels.
On the other hand, a strong rally above 27,500 will strengthen the bullish momentum and the medium-term uptrend that has been in place since last October.
Subsequently, the index can rally to 27,700 and 28,000 in the ensuing weeks. As long as it trades above the key support level in the 25,800-26,000 band, the medium-term uptrend will remain intact
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