Last week, domestic bellwether indices, Sensex and Nifty 50, overturned bearish sentiment and surged on the back of buying interest. A strong rally in banking stocks helped the Nifty Bank index gain over 7 per cent and this rally, in turn, to regain bullishness. The key factors that helped are an appreciating rupee against the greenback and the strong rally in Nifty Bank that gained 4 per cent on Friday, helped by positive earnings reported by SBI. Further, the RBI announced a surplus transfer of ₹99,122 crore for the nine-month period from July 2020 to March 2021.

For the week ahead, the direction in global markets, May month derivatives expiry and rupee movement need to be watched for further cues.


Nifty 50 (15,175.3)

The Nifty 50 commenced the past week on a positive note and gained 1.67 per cent last Monday. Thereafter it tested the vital resistance at 15,000 and witnessed a minor corrective decline that has filled the recent gap. Regaining bullish momentum, the index jumped 1.8 per cent on Friday, conclusively breaking through the key hurdle at 15,000. For the week, it has gained 497 points or 3.4 per cent.

The week ahead : With the recent breakthrough of the resistance at 15,000, the index has altered the downtrend that was in place from the February high of 15,431. Also, it has reinforced the bullish momentum. The index trades well above the 21- and 50-day moving averages. Since it took support at around 14,200 in late April this year, it has been in a near-term uptrend, shaping higher peaks and troughs. The Nifty 50 index, which was largely range-bound between 14,500 and 15,000 over the past three weeks, has now begun to trend upwards after an upward breakthrough.

However, the index now faces an immediate resistance at 15,200. The daily relative strength index is on the brink of re-entering the bullish zone (above 60 levels) from the neutral region and the weekly RSI has re-entered the bullish zone. Further, the daily as well as weekly price rate of change indicator are in the positive terrain, implying buying interest. A decisive breach of 15,200 levels will underpin the bullish momentum and take the index northwards to 15,400 levels. Key resistances thereafter are at 15,500 and 15,600 levels.

On the downside, the crucial base level of 15,000 will act as an initial cushion. Next key supports are at 14,870 and 14,600 levels. A decisive downward break of 14,600 will drag the index lower to 14,400 and then to 14,200 levels. That said, a further plunge below the vital base level of 14,000 will reinforce selling interest. In that case, the index can trend downwards to the next support in the 13,500-13,600 range. Supports thereafter are at 13,330 and 13,000 levels.

Medium-term outlook : The strong gain in the past week has strengthened the intermediate and medium-term uptrend. Since the index took support at the December 2020 low of 13,131 levels, it has been in a medium-term uptrend. Last week, it conclusively surpassed a key resistance at 15,000-mark and is now poised just below 15,200 levels. A break above this can strengthen the medium-term uptrend and pave the way for an up-move to 15,500 and then to 15,600. Thereafter resistances can be encountered at 15,800 and 16,000-mark.

On the other hand, as long as the index trades above 14,000 levels, the medium-term uptrend will remain in place. A downward break-out of the base level of 14,000 will change the uptrend and pull the index down to the 13,500-13,600 band and to 13,000 levels over the medium term.

Sensex (50,540.48)

The Sensex jumped 1,807 or 3.7 per cent, experiencing buying interest last week, and has surpassed a key barrier at 50,000 level, the psychological level. The index hovers well above the 21- and 50-day moving averages. Nevertheless, it faces a key resistance ahead at 51,000. A strong break-out of this level will take it higher to 51,400 and then to 52,000 levels. A further breakthrough of 52,000-mark is needed to reinforce the bullishness and take the Sensex northwards to 53,000 and then to 54,000 over the medium term.

Conversely, if the index fails to move beyond 51,000, then a likely corrective decline to 50,000 is possible. The vital level can provide base for the index. Having said that, a fall below this support can drag it to 49,500 and then to 49,000 levels. Subsequent support for the index is placed in the 47,700-48,000 zone. Investors with a long-term horizon can remain invested with a revised stop-loss at 41,000.

Nifty Bank (34,606.9)

The Bank Nifty has skyrocketed 2,437 points or 7.5 per cent in the past week, conclusively breaking above the resistances at 33,000 and 34,000 levels. Both daily and weekly relative strength indices have re-entered the bullish zone from the neutral region. The daily price rate of change indicator features in the positive terrain, implying buying interest and the weekly price rate of change indicator is likely to enter the positive terrain from the negative. Going forward, the index can test resistance in the band between 34,800 and 35,000 in the coming weeks. An emphatic break-out of this band will reinforce the bullish momentum and pave the way for an up-move to 35,500 initially and then to 36,000 levels. Next resistances are at 36,500 and 37,000. Traders can make use of dips to buy while maintaining a fixed stop-loss.

On the downside, the immediate support at 34,000 can provide base for the index. But a strong plunge below this level can extend the down-move to 33,300 levels. Supports thereafter are at 33,000 and 32,000 levels. Selling pressure will intensify only if the index tumbles below 32,000 levels and in that case, it can decline to 31,000 levels over the short term.

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