Index Outlook . Indices move within a narrow range

It was a boring session for Indian equities, as bellwether indices — Nifty and Sensex — moved in a narrow range. Even global markets remained range-bound. The outcome of the no-confidence motion may only lead to a knee-jerk reaction in the market, after which the focus will be back on the ongoing earnings season. The July month derivatives expiry can keep the market volatile. Weakening of the rupee against the dollar and falling crude oil prices need to be watched. On the global front, the ECB rate decision and US GDP can provide cues in the latter part of the week.

Nifty 50 (11,010.2)

It was a choppy week for the Nifty index, which moved in a narrow range between 10,950 and 11,050, testing the significant psychological resistance at 11,000. The index fell marginally by 8.7 points or 0.08 per cent.

Short-term trend: The index began the previous week on a fragile note and fell sharply below the 11,000-mark. Nevertheless, it took support around 10,950 and bounced back, recovering its previous loss. The index failed to sustain at higher levels, and retreated on selling pressure, ending the week on a flat note. It has formed a spinning top candlestick pattern in the weekly chart, implying near-term indecisiveness. The short-term uptrend that commenced from the March low at around 9,950 continues to be intact. A decisive break above the current hurdle can push the index higher to the next crucial resistance level of 11,150. Inability to make a decisive rally beyond 11,000 can witness a corrective decline which can find support either at 10,900 or 10,800 levels in the short term.

The index continues to hover way above its 21 and 50-day moving averages. The daily relative strength index has re-entered the bullish zone from the neutral region and the weekly RSI continues to feature in the bullish zone, strengthening the uptrend. Also, the daily and weekly price rate of change indicators feature in the positive territory, indicating continued buying interest.

We reiterate that a conclusive break above 11,150 can push the index northwards to 11,250 levels in the short term. On the other hand, a decisive fall below the key near-term support level of 10,800 can drag the index down to the next vital base level of 10,600.

Short-term traders can make use of corrective declines to take long positions with a stop-loss at 10,750 levels. Significant supports below 10,600 are pegged at 10,550 and 10,400. The index needs to conclusively fall below the base level of 10,400 to alter the uptrend.

Medium-term trend: Following an upward breakthrough of the key resistance level of 10,900, the medium-term trend is up for the index. It can continue its uptrend and test the key resistance at around 11,150 in the ensuing weeks. A strong upward break above this barrier will pave way for an up-move to 11,250 and 11,500 in the medium term, but minor corrective dips cannot be ruled out.

Conversely, the support in the 10,400-10,450 band is crucial. Only a decisive plunge below this will start threatening the uptrend and pull the index down to 10,200 and 10,000 levels.

 

Sensex (36,496.3)

The Sensex was range-bound last week and it fell by 45 points or 0.12 per cent. The index now tests resistance at 36,500. A clear rally above this level can push the index higher to test next barriers at 36,800 and 37,000 levels in the short term. Although the daily indicators feature in the bullish zone, they are moving downwards, displaying mixed cues.

Any near-term correction can take support at the 36,200-36,000 zone. Having said that, a plunge below 36,000 can start weakening the near term up-move and drag the index down to 35,800 and then to 35,400 levels. Support to note below 35,400 is at 35,000.

Medium-term trend: After a strong recent rally, the medium-term trend is up for the index. The uptrend can extend and hit the targets of 37,000 and 37,400 levels in the medium term with some minor blips. Significant supports are placed at 35,600 and 35,000 levels.

Nifty Bank (26,873.2)

The Bank Nifty was also volatile in the prior week and slipped marginally by 62 points or 0.23 per cent.

The index has been testing the significant resistance level of 27,000 over the past two weeks. The short-term uptrend that has been in progress from the March low is intact.

The index trades well above its 21- and 50-day moving averages. The daily relative strength index has slipped into the neutral region from the bullish zone and the weekly RSI continues to feature in the bullish zone.

Buying interest is evident as both the daily and weekly price rate of change indicators hover in the positive terrain.

An emphatic breakthrough of the current resistance at 27,000 can underpin the short-term uptrend and take the index northwards to 27,500 and 28,000 levels in the short- to medium-term.

Nevertheless, if the index fails to rally beyond 27,000, it can experience a corrective decline. Such a down-move can find support either at 26,750 or 26,500 levels in the short term.

Traders with a short-term view should tread with caution and consider going long above 27,000 levels with a fixed stop-loss. Supports after 26,500 are at 26,200 and 26,000.

A dive below the level of 26,000 will strengthen the downtrend and pull the index down to 25,750 and 25,500 levels in the medium term.

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