Index Outlook. Investors, wait and watch

Positive US markets uplifted the mood of the domestic and Asian markets last Monday. Ongoing talks to avoid a trade war between the US and China eased the pressure on global markets. Following the positive Asian markets, the bellwether indices bounced back strongly last week. As equity markets rallied, investors shifted focus from gold and oil that retreated last week. The benchmark indices — the Nifty and the Sensex — slumped about 3.6 per cent each in March. In the upcoming week, the investors need to keep tab on the global markets, which has been the driving force in recent times. The March month auto sales numbers and rupee movement also need to be watched.

 

 

Nifty 50 (10,113.7)

The Nifty index took support at the psychological support level of 10,000 and bounced up in the initial part of last week. However, after testing the resistance at 10,200, it retreated on Wednesday. The index managed to close the week on a positive note by gaining 115 points or 1.16 per cent.

Short-term trend: The index is still in a short-term downtrend. Nonetheless, it has a significant support in the 10,000-10,100 band which provided base last week. The index is in a corrective rally and faces a key resistance ahead at 10,200. An emphatic breach of this hurdle can push the index higher to 10,420, which is a significant medium-term resistance for the index. The indicators and oscillators in the daily chart show mixed signals now.

A strong rally beyond 10,420 can take the corrective rally higher to 10,500 and 10,600 levels. To bring back a bullish momentum, the index needs to decisively breach the key resistances level of 10,600. Such a rally can take the index northwards to 10,700 and 10,800 levels eventually. On the other hand, a conclusive downward breakthrough of the key base of 10,000 can reinforce the selling pressure and drag the index down to 9,800 and 9,700. Traders with a short-term perspective should tread with caution in the band between 10,000 and 10,400.

Medium-term trend: Last week, the index tested the key support in the 10,000-10,100 band and rebounded. Investors need to be alert at this juncture as the bounce back rally lacks strength and the possibility of re-testing the 10,000-mark cannot be ruled out. An emphatic fall below 9,950 will underpin the downtrend that started from the late January high and dragged the index down to 9,560 and 9,170 over the medium term.

Conversely, a decisive upward breach of 10,700 is required to take the index higher to 11,000 and 11,200 over the medium term. Investors with a medium-term horizon should remain on the side-lines at this juncture.

Sensex (32,968.6)

Taking support at around 32,600, the Sensex bounced back in the truncated week and advanced 372 points or 1.14 per cent.

Short-term trend: The short-term trend remains down for the index. Following a strong rally on Monday, the index filled the downward gap formed recently. But it failed to sustain its up-move and reversed from 33,370 levels. The index now faces an immediate resistance in the range between 33,370 and 33,400. A strong rally above this level can extend the corrective up-move and take the index higher to 33,800 and 34,000 levels in the short term. To alter the on-going down-trend, the index needs to conclusively breach the key medium-term resistance level of 34,600. Next medium-term targets are 35,000 and 35,375.

That said, the inability to move beyond the key resistances at 33,800 and 34,000 can drag the index down and it could then consolidate sideways between 32,600 and 34,000 for a while. A slump below 32,600 can pull the index down to the next vital base level at 32,400 and 32,000 in the short term. A conclusive breakthrough of 32,000 will strengthen the downtrend and drag the index lower to 31,800 and 31,650. Subsequent supports to note are at 31,400 and 31,200.

Nifty Bank (24,263.3)

The Bank Nifty witnessed a strong bounce back last week, backed by good rally in PSU bank stocks. The index surged 592 points or 2.5 per cent. However, the key resistance at 24,500 capped the rally last week. Currently, the index once again faces this resistance. The short as well as medium-term trends are still down for the index. The index has key supports at 24,000 and 23,670, which can limit the downside. Therefore, traders with a short-term perspective should tread with caution in the coming week.

A strong breach of 24,500 can accelerate the index higher to 25,000. In such a scenario, traders can take long positions with a fixed stop-loss. Further rally above 25,000 can push the index northwards to 25,500 and 25,700. Break above the key resistance level of 26,000 is required to change the downtrend and take the index to 26,500 or 27,000 in the medium term. But plunge below the key support level of 23,000 can drag the index down to 22,670 and 22,500.

Global cues

After testing the major support at 20,500 last week, the Nikkei 225 bounced back smartly gaining 836 points or 4 per cent to close at 21,454 levels. The index now tests resistance at 21,400. A strong rally can push the index higher to 21,800 and then to 22,000 . But, inability to rally beyond 21,400 can pull the index down to 20,800 and then to 20,500 . Subsequent supports below 20,500 are 20,000 and 19,500.

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