The Indian benchmark indices, Sensex, Nifty 50 and the Nifty Bank indices began the week on a weak note with a sharp fall on Monday. Although they managed to recover all the loss after that, the bounce back move seems to lack strength. That leaves the near-term outlook weak. The indices look vulnerable to fall again. However, strong supports are coming up for the Sensex, Nifty and the Nifty Bank index which can halt the current fall. As such, we can expect the indices to begin a fresh leg of rally after some more fall from here.
The Dow Jones Industrial Average in the US has surged over a per cent last week. The index looks strong and can outperform the Indian benchmark indices in the coming weeks.
Among the sectors, the BSE Heathcare and BSE Auto indices outperformed last week. They rose 2 per cent and 1.98 per cent respectively.
Sell-off continues
The Foreign Portfolio Investors (FPIs) continue to sell Indian equities. The Indian equity segment saw a heavy outflow for the second consecutive week. The FPIs sold about $3.76 billion in equities last week. There has been a net outflow of about $6.95 billion in the first two weeks of this month. Unless the FPIs begin to buy, the Sensex and Nifty are not likely to rise back.
Nifty 50 (24,964.25)
The bounce from the low of 24,694.35 failed to get a strong follow-through rise above 25,200. The index has come-off from the high of 25,234.05 to close the week at 24,964.25, down 0.2 per cent.
Short-term view: Failure to sustain the break above 25,200 leaves the picture weak. Nifty can fall to 24,750 – an immediate support. A further break below 24,750 will see the fall extending to 24,450 and 24,350 – the next important supports.
A fall beyond 24,350 looks less likely. A rise back again from the 24,450-24,350 support zone can take the Nifty above 25,000 again. It will also have the potential to breach 25,200 and take the index up to 25,500-25,700 in the short-term.
In case the Nifty manages to bounce from 24,750 itself, then the above-mentioned rise to 25,500-25,700 can happen much faster without seeing the extended fall.
Medium-term view: As mentioned last week, the recent fall is just correction within the broad uptrend. As long as the Nifty stays above 24,000 there is not threat for the uptrend. As such we retain our bullish view of seeing a rise to 27,400-27,950 in a month or two.
However, we reiterate that 27,400 and 27,950 are strong resistances where the Nifty can find a top. So, it is important to turn cautious for a reversal as the Nifty approaches 27,400-27,950.
The rise to 27,400-27,950 will get negated in case the Nifty declines below 24,000 from here itself. In that case, the danger of the fall to 23,000 will increase and that will indicate a trend reversal.
Nifty Bank (51,172.30)
Nifty Bank index bounced from the low of 50,194.30 but failed to get a sustained rise above 51,700. The index has closed the week at 51,172.30, down 0.56 per cent.
Short-term view: The immediate outlook is weak. The Nifty Bank index can fall to 50,300 from here. Failure to bounce back after this fall, can drag the Nifty Bank index further down to 49,750 or even 49,300. After this fall, we can expect the index to rise back again and rise towards 51,000-52,000 again.
To avoid the fall to 49,750-49,300 mentioned above, Nifty Bank index has to sustain above 50,300. Also, a strong rise above 52,000 is needed to turn the sentiment positive. Only then the rise to 53,000-53,500 will come into the picture.
Medium-term view: Nifty Bank index remains well within the broad 49,650-54,500. Strong support is around 49,000 as well. So, a fall to 49,300-49,000 will be a very good buying opportunity from a long-term perspective.
As long as the Nifty Bank index stays above 49,000, we will retain our bullish view of seeing a rise to 57,000-58,000 over the medium-term.
Sensex (81,381.36)
Sensex failed to sustain the rise above 82,000 last week. It made a high of 82,319.21 and has come down from there. It has closed the week at 81,381.36, down 0.38 per cent.
Short-term view: Support is at 80,600 which can be tested early this week. A break below 80,600 can drag the index down to 80,000-79,950 or even 79,300 in the short-term.
We can expect the Sensex to rise back from around 80,000 itself or from 79,300 and go up to 81,500 first. A further break above 81,500 will then clear the way for a fresh rise to 83,000 and higher levels in the short-term.
Medium-term view: The broader view remains positive as long as the Sensex stays above 79,000. That will keep alive the chances of the index rising towards 85,000 again and then to 88,000-89,000 in the coming months.
The bullish view will get negated only if the Sensex declines below 79,000. If that happens, a fall to 77,500 and lower levels is possible.
Dow Jones (42,863.86)
The support in the 42,000-41,700 region has held very well in line with our expectation. The Dow Jones Industrial Average made a low of 41,831.74 and rose sharply breaking above the resistance at 42,550 as expected. The index touched a high of 42,899.75 before closing the week at 42,863.86, up 1.21 per cent.
Outlook: The bullish view remains intact. The region between 42,500 and 42,400 will now act as a strong support. The Dow Jones can rise to 43,300-43,500 from here. Thereafter a corrective fall to 42,500 is a possibility. But the overall uptrend will remain intact as long as the index sustains above 42,000-41,700.
As such a fresh leg of rise from around 42,500 after the corrective fall mentioned above will have the potential to breach 43,500. Such a break can take the Dow Jones up to 44,500 in a month or two.
