index outlook. More rise to come, but…

Indian benchmark indices have risen for the third consecutive week. The Sensex and Nifty 50 had surged 2.97 per cent each last week. This rally has taken these indices well above the key near-term resistance that we had expected to hold. 16,100 on the Nifty and 54,100 on the Sensex were the resistances that we had expected to cap the upside and trigger a reversal. But the benchmark indices have surged breaking this hurdle and has closed the week on a strong note.

This indicates that our broader bearish view of seeing 14,500-13,500 on the Nifty and 49,000-48,000 on the Sensex is on a pause now. However, this bearish view has not been completely negated yet. We will need further strong rally from here to confirm that the fall is not happening.

All the sectoral indices closed in green. The BSE Consumer Durables index surged the most last week. It was up 6.51 per cent. The BSE Capital Goods, BSE FMCG and the BSE Realty indices were all up over five per cent each.

The Foreign Portfolio Investors’ (FPIs) selling remained at a slower pace for the second consecutive week. They sold about $485 million in the Indian equity segment.

Nifty 50 (16,220.6)

The resistance at 16,100, that we had expected to hold, has been broken decisively. Barring the fall on Tuesday, Nifty 50 traded on a positive note all through the week. It has closed on a strong note at 16,220.6 — up 2.97 per cent.

Chart Source: MetaStock

The week ahead: The break above 16,100 has turned the outlook bullish. Supports are now at 16,160 and 16,000. Nifty will have to decline below 16,000 to come under pressure and fall to 15,800 and 15,750 again. But that looks less likely immediately.

As such any dips this week can be limited to either 16,160 itself or 16,000. There is room for a rise to the next important resistances at 16,430 and 16,620 – the 21-week moving average. If the Nifty manages to breach 16,620, the upside can extend up to the crucial resistance level of 16,830.

Trading Strategy: The stop-loss at 16,180 on the short positions recommended last week has been hit. Traders can go long now and accumulate on dips at 16,180 and at 16,060. Stop-loss can be placed at 15,930. Trail the stop-loss up to 16,310 as soon as the index moves up to 16,420. Move the stop-loss further up to 16,520 when it touches 16,580. Book profits at 16,610.

Medium-term outlook: The fall to 14,500 that we have been mentioning here for some time is not happening immediately. However, this bearish view has not yet been completely negated. The crucial trend deciding level to watch now is 16,830. Only a strong and sustained rise past this hurdle will turn the outlook bullish and negate the chances of seeing 14,500 on the downside. In that case, the doors will open to test 17,500-17,800 levels.

On the other hand, if Nifty fails to breach 16,830 and reverses lower, then that will keep alive the danger of seeing 14,500 and lower levels on the downside over the medium-term.

Sensex (54,481.84)

Sensex has closed well above the key level of 54,100 last week. The index was up 2.97 per cent and has closed the week at 54,481.84.

Chart Source: MetaStock

The week ahead: Immediate resistance is at 54,700. However, there are strong supports available to limit the downside. Any pull-back from 54,700 can find support in the 53,900-53,800 region. As long as the Sensex trades above 53,800, the short-term outlook is bullish. A break above 54,700 can take it up to 55,250 and 55,650 – the next important hurdles. If Sensex manages to breach 55,650 also, then the rally can extend up to 56,400.

Important supports are at 53,800 and 53,500. Sensex will have to fall below 53,500 the come under pressure again. In that case, a fall to 52,800 and lower levels can be seen.

Medium-term outlook: The fall to 49,000-48,000 that we have been expecting is not happening immediately. However, the chances are not completely negated yet. Crucial level to watch is 56,400. A reversal from here will still keep the chances alive of seeing 49,000-48,000. Only a strong rise past 56,400 will negate that chance and will open the doors to revisit 58,000 and 60,000 levels. As such, we will have to watch the price action around 56,400 very closely.

Nifty Bank (35,124.05)

The Nifty Bank index has seen a strong surge last week breaking above the key resistances at 34,000 and 34,400. We had expected the upside to be capped at 34,400 and the index to reverse lower. But that has not happened. The index has closed the week at 35,124.05 — up 4.72 per cent.

Chart Source: MetaStock

Immediate resistance is at 35,290. A pull-back from here can find support 34,500. As long as the index stays above 34,500, the outlook is bullish. A break above 35.290 can take the Nifty Bank index up to 35,770 – an important resistance to watch. A sustained break above 35,770 is necessarily needed to retain the bullish momentum and also to see 37,000-37,300 on the upside.

From a bigger picture, inability to breach 35,770 and a strong reversal from there can bring back the danger of seeing 32,000 on the downside into the picture again.

Global cues

The Dow Jones Industrial Average (31,338.15) is getting good support in the 30,500-30,300 region. The price action on the chart indicates that every dip below 30,500 is getting bought. The index has risen well above 31,000 and has closed at 31,338.15, up 0.77 per cent for the week.

However, the picture is not extremely bullish yet. Immediate resistance is at 31,750. Next strong hurdle is in the 32,000-32,200 region. The Dow has to rise past 32,200 decisively to become extremely bullish and negate the danger of a fall to 30,000-29,500. As such, we can allow for a rise to 31,700 and even 32,000-32,200 in the coming weeks. But we will have to remain cautious, and the price action thereafter will need a close watch.

What to watch

Support at 16,000 on Nifty

Support at 53,500 on Sensex

Support 34,500 on Nifty Bank

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