The boarder indices, the Nifty and the Sensex, started the previous week on a bearish note. Weak IIP data, flip flop on GST, rising crude oil prices and US President-elect Trump’s blunt talk on visas, dampened sentiments. The index traded sideways, ahead of the US Fed Reserve policy meeting. Subsequently, the Fed raised interest rates by 25 basis points and maintained a hawkish stance, indicating more rate hikes in 2017.
This could result in volatility and uncertainty in flows into the Indian equity market and other emerging markets in the coming year. Moreover, the Bank of England has kept interest rates on hold at record low of 0.25 per cent and maintained its easing stance. BoJ’s rate decision, US GDP Q3 estimates and initial jobless claims, arekey global events to watch for in the coming week.
Nifty 50 (8139.4)The Nifty 50 index was volatile and ended the prior week on a negative note, declining 122 points or 1.48 per cent. The index was moving around the 200-day moving average line last week.
In such a scenario, the index can test next resistances are at 8,300 and 8,400 levels in the short term. Both the daily and weekly relative strength indices feature in the neutral region, showing lack of bullish momentum.
But the daily price rate of change indicator has marginally re-entered the positive territory. This implies a pick up in buying interest, though further confirmation is needed.
We reiterate that to alter the short-term downtrend, the index needs to conclusively move beyond 8,300. Then, the index can continue to trend upwards to 8,400 and 8,500 levels. Traders with a short-term view should tread with caution and consider initiating fresh long positions on a strong rally beyond 8,200 with a fixed stop-loss.
The index recorded an intra-week low at 8,121.9 and is now just trading above the key immediate support level of 8,100. Strong fall below this level can strengthen the down move and pull the index to the 7,930-8,000 band. Key supports below 7,930 are at 7,900 and 7,800.
Medium-term trend: There is no major change in the medium-term trend for the index, which continues to be down since the September peak of 8,968. Currently, it is in a corrective phase. Strong rally beyond 8,300 is required to push the Nifty higher to 8,400 and 8,500. Only an emphatic breakthrough of the key resistance level of 8,500 can reverse the medium-term downtrend and push the index higher.
Subsequent targets are 8,700 and 8,900 levels, which are the next key resistances. Conversely, if the index tumbles below immediate support in the band between 7,930 and 8,000, it can strengthen the downtrend. Next downside target is 7,800. Key medium-term supports are placed at 7,700 and 7,600.
Sensex (26,489.5)Last week, the Sensex fell 257 points or 0.96 per cent, amidvolatility. The index continues to test the key resistance at 26,500. Strong rally above this level can take it higher to the next significant as well as psychological level of 27,000 in the short term.
To alter the medium-term downtrend, the index needs to conclusively breakthrough the key resistance level at 27,500 and trend northward to 28,000. However, inability to move past 27,000 or 27,500 can drag the index down to 26,230 and 26,000 levels. Further decline below 26,000 will strengthen the downtrend and pull the index down to 25,500 and then to 25,000 levels over the medium term.
Bank Nifty (18,312.8)Bank Nifty plunged 383 points or 2 per cent. The index retreated below 18,500 witnessing selling pressure, making the move beyond 18,500 a false break-out. On the other hand, the index can find support at immediate support level of 18,000. The index can move sideways in the wide range between 18,000 and 19,000 for a while. Traders with a short-term perspective should desist trading as long as the index is range-bound. Decisive breakthrough of 19,000 will pave way for an up-move to 19,500 and 20,000 in the medium term. On the flip side, a conclusive slump below 18,000 will pave way for a decline to 17,500 levels.
Global cuesThe Dow Jones Industrial Average was choppy and added 86 points to close at 19,843.4. The index recorded a new high at 19,966 which was very close to touching the 20,000-mark. It can test 20,000 in the coming week. A downward reversal is on the cards as the daily as well as weekly indicators continue to feature in the overbought territory.
Strong slump below the immediate support at 19,500 can pull the index down to 19,200 and 19,000 levels in the short term.
The Nikkei 225 index advanced 404 points or 2 per cent to close at 19,401, conclusively breaching key resistance at 19,000 in the week ago. Next hurdles are at 19,500 and then at 20,000. Supports to note are at 19,000 and 18,500 levels.