Sensex and Nifty 50 made a sharp rise on Friday after being range-bound all through the week. The strong close on Friday has reduced the danger of the corrective fall that we had cautioned last week. The Nifty Bank index is also managing to stay afloat. The index is getting strong support around 49,650 over the last couple of weeks. On the charts, the short-term picture is positive. We can expect the Sensex, Nifty 50 and the Nifty Bank index to move up from here in the short term.
Among the sectors, the BSE IT index outperformed last week by surging 4.27 per cent. It was followed by the BSE Consumer Durables index, which was up 3.9 per cent. The BSE PSU index underperformed last week. The index was down 1.23 per cent.
FPI flows
The foreign portfolio investors (FPIs) continue to sell the Indian equities. They sold about $925 million in the equity segment last week. The month of August has seen a net outflow of about $2.53 billion. Continuing foreign money outflows may restrict the pace of the rise in the Sensex and Nifty. FPIs’ action in the coming weeks will need a close watch.
Nifty 50 (24,541.15)
Nifty continued its struggle to breach 24,400 last week as well. But on Friday, the index rose over a per cent breaching that hurdle. Nifty has closed the week on a positive note at 24,541.15, up 0.71 per cent.
Short-term view: The near-term outlook is positive. Immediate support will be at 24,400. Below that, 24,100-24,000 region is the next strong support. We expect the Nifty to sustain above 24,000 this week. A rise to 24,850-24,900 can be seen initially. If the Nifty manages to breach 24,900 decisively, then an extended rise to 25,450 and 25,550 is possible in the short term.
In case the Nifty turns down from around 24,900, a corrective fall to 24,500-24,400 is possible.
The short-term outlook will turn bearish only if the Nifty declines below 24,000. If that happens, a fall to 23,500 and lower levels will come into the picture. But such a fall looks less probable at the moment.
Medium-term outlook: As long as the Nifty stays above 24,000, the medium-term outlook will also be bullish. The fall to 23,000-22,000 that we had mentioned last week is not happening. That bearish view will come into the picture only if the Nifty breaks below 24,000.
For now, as long as the Nifty stays above 24,000, the bias will be bullish and it is likely to see 26,000-27,000 on the upside in the coming months. A decisive break above 25,000 will pave way for this rally.
Nifty Bank (50,516.90)
Nifty Bank index is getting strong support around 49,650 over the last couple of weeks. The index touched a low of 49,654.65 last week and then has risen back well recovering all the loss. It has closed the week on a flat note at 50,516.90.
Short-term view: The bounce from near 49,650 for the second consecutive week is a positive. It indicates a possible double-bottom formation on the daily chart. The near-term outlook is bullish.
Nifty Bank index can rise to 51,000 initially. A break above 51,000 can take it up to 51,450 and 51,650. The price action thereafter will need a close watch.
If the Nifty Bank index manages to breach 51,650, it will be bullish to see 53,000 and higher levels in the short term. But a reversal from around 51,650 can drag the index down to 51,000 and even 50,000 again.
The region between 49,650 and 49,600 is a strong support zone. The short-term outlook will become bearish only if the index breaks below 49,600. Such a break, if seen, can drag the index down to 49,000 and lower.
Medium-term view: The big picture remains bullish for the Nifty Bank index. As long as the index stays below 52,600, there is room for a corrective fall to 48,500-48,000 and even 47,000. But such a fall will be a very good buying opportunity from a long-term perspective.
As long as the Nifty Bank index stays above the 48,000-47,000 support zone, it has potential to target 54,000 and even 57,000 over the long term.
Sensex (80,436.84)
Sensex made a decisive break above 80,000 towards the end of the week. It touched a high of 80,518.21 before closing the week at 80,436.84, up 0.92 per cent.
Short-term view: Sensex has an immediate resistance around 80,700. A break above it can take the index upto 82,500-82,700 in the short term. In case, the Sensex fails to breach 80,700, it can fall back to 80,000 and even lower, going forward. The price action around 80,700 will need a close watch this week.
Medium-term view: Sensex has to breach 82,000 decisively to bring back the earlier bullish momentum. If that happens, then a rise to 84,500 and higher levels is possible.
Strong support is around 78,000. The index will come under pressure only if it declines below this support. That can take it down to 76,000 and even 74,000. However, such a fall will be a very good long-term buying opportunity.
For now, 78,000-82,000 looks likely to be the possible trading range. A breakout on either side of it will determine the next move.
Dow Jones (40,659.76)
Dow Jones Industrial Average had surged breaching the key 40,000-level last week. This has completely negated the chances of the fall to 38,200 that we had expected a couple of weeks ago. The index has closed on a strong note at 40,659.76, up 2.94 per cent.
Outlook: Immediate support is at 40,400. Below that, 40,100-40,000 is the next strong support. Important resistances are at 40,900 and 41,100, which can be tested this week.
If the Dow Jones manages to breach 41,100, it will be very bullish to see 42,000 on the upside. On the other hand, a turnaround from either 40,900 or 41,100 can take the Dow down to 40,400 and lower again. As such, the price action in the 40,900-41,100 region will need a close watch this week.