Both Bank of Japan as well as the US Fed kept their respective interest rates unchanged last week. The bellwether indices — Nifty and Sensex — extended their weekly gains by climbing marginally higher. Foreign institutional investors (FIIs) continue to be net buyers in the equity segment. With the September derivatives expiry ahead on Thursday, investors should tread with caution. Other global event that could impact the equity markets are OPEC meeting and US GDP data for the second quarter.
Nifty 50 (8,831.5)In the midst of choppiness, the Nifty 50 index advanced 51 points or 0.6 per cent in the previous week. The index faces a key resistance at 8,900 levels.
Following a strong move above 8,700, the index has been in a sideways movement over the past three weeks, in the band between 8,700 and 8,900. The immediate support at 8,700 can cushion the index in the near term. But a strong plunge below 8,700 will have bearish implications and drag the index down to 8,654.
At this juncture, traders with a short-term perspective should tread with caution as long as the index moves in the aforementioned range. Only a conclusive tumble below 8,700 will be a cue for going short with a fixed stop-loss.
The short-term uptrend will be mitigated if the index breaks below 8,654 levels. Next support is at 8,500. Key resistance above 8,900 is at 9,000.
Medium-term trend: The index has been trending northwards since late February low. This uptrend will be intact as long the index manages to trade above the significant support level at 8,000. Strong decline below 8654 can pull the index down to 8,500 levels. Key medium-term support below 8,500 is at 8,300.
On the other hand, decisive breakthrough of the psychological 9000-mark can accelerate the index to 9,100 and 9,344 in the medium term. Investors with a medium-term view can remain invested with a stop-loss at 8,000.
Sensex (28,668.2)The Sensex witnessed another volatile week and closed marginally on a positive note. It added 69 points, this time under-performing the Nifty 50 index.
This week: The index formed a spinning top candlestick pattern in the weekly chart implying indecisiveness. This indicates that the investors are unable to make up their mind.
Over the last three week, the index has been on a sideways move, broadly between 28,250 and 29,000. Slump below 28,500 can pull the index down to 28,250 or even to 28,000. Further decline below 28,000 will be threat to the short-term uptrend and will strengthen the bearish momentum. Then, there is a possibility of the index declining 27,700 and 27,500 levels. Immediate resistances for the index are placed at 28,941 and 29,332. Conclusive rally above 29,000 will alter the bearish view.
Medium term trend: Since late February, the index has been trending upwards. A decisive fall below 26,200 is needed to alter this medium-term uptrend. Significant resistances beyond 29,000 are at 29,130 and 30,104.
Global cuesLast week, the Dow Jones Industrial Average added 137 points or 0.7 per cent to close at 18,261.4, in the midst of choppiness. Key resistance at 18,400 halted the index rally. It continues to trade below the 21 and 50-day moving averages.
A decisive breach of 18,400 is needed to strengthen the short-term bullish momentum and take the index northwards to 18,550 and 18,650 levels in the coming weeks. On the other hand, continuation of the decline can pull the index down to 18,000 in the near term.
Downward break through of 18,000 will reinforce the bearishness and pull the index down to 17,800 and then to 17,500 in the short to medium term.
Despite 4 per cent plunge in the West Texas Intermediate crude price on Friday, it is up 3.5 per cent for the week and closed at $44.5 per barrel.