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The Indian benchmark indices ran into a correction last week. Sensex and Nifty 50 fell 0.8 and 0.5 per cent respectively last week and have closed lower. However, on the charts, the fall last week has not changed the structure. The bigger picture looks bullish. Though there is room for some more fall from the current levels, there are supports to halt the fall. As such, we can expect the Sensex and Nifty 50 to bounce back either from here itself or after a little more fall.
Among the sectors, the BSE Realty and BSE Power indices surged by 5.08 and 6.46 per cent and outperformed last week. The BSE FMCG and BSE Bankex underperformed and were down 1.38 per cent and 1.54 per cent respectively.
Watch the FPIs
The foreign money flows slowed down last week. After witnessing a strong inflow over the last six weeks, the equity segment got an inflow of just $191.3 million last week. However, for the month of July, the foreign portfolio investors (FPIs) have pumped in about $6.6 billion into Indian equities. The FPI action in the coming weeks will need a close watch. In case they turn net sellers, Sensex and Nifty can find it difficult to rise back.
Nifty 50 (19,646.05)
Nifty remained under pressure all through the week. Although it attempted to rise mid-week, the index failed to get a strong follow-through rise. Nifty fell to a low of 19,563.10 on Friday before closing at 19,646.05, down 0.5 per cent for the week.
Short-term view: Nifty failed to get a strong follow-through rise above 19,800 last week. That could keep the index under pressure. However, Nifty has key supports at 19,560 – the 21-Day Moving Average (MA) and at 19,500 – a trendline support. Though there is room to fall further, the downside could be limited to 19,500 this week.
We can expect the Nifty to reverse higher either from 19,560 or 19,500. Thereafter, a subsequent rise past 19,800 will boost the momentum and will take the Nifty up to 20,000-20,200 in the short term.
In case, the index breaks below 19,500, an extended fall to 19,400-19,370 can be seen.
Nifty running into a sideways consolidation between 19,500 and 20,000 for a few weeks is another possibility.
Graph Source: MetaStock
Medium-term view: The broader picture is still bullish. Strong support is in the 19,200-19,000 region. But we reiterate that the region around 20,200 is a strong long-term resistance that can halt the current rally. So, though there is room to move above 20,000, market participants have to be cautious as the Nifty nears 20,200. We expect 20,200 to hold on its first test atleast and trigger a corrective fall to 19,500 and even 19,000.
The medium-term outlook will turn bearish only if the Nifty declines below 19,000. That looks less likely as of now.
Sensex (66,160.20)
The fall to 66,000-65,900 happened last week in line with our expectation. Sensex made a low of 65,878.65 on Friday and has bounced back from there to close the week at 66,160.20. The index is down 0.79 per cent for the week.
Short-term view: The immediate picture is weak. Failure to rise past 67,000 last week makes it a good short-term resistance for the index. The chances are looking high for the Sensex to fall further towards 65,500-65,300 this week. The chances of the fall extending even up to 65,000 cannot be ruled out.
We can expect the Sensex to reverse higher again either from 65,500-65,300 itself or after an extended fall to 65,000. That reversal can take the index up to 67,000 and even higher, going forward. To bring back the positive sentiment, a strong rise above 67,000 is needed.
Graph Source: MetaStock
Medium-term view: The medium-term picture is slightly mixed. Sensex has already tested its long-term resistance near 67,700 unlike Nifty 50, which is yet to touch that corresponding resistance around 20,200.
Crucial support is in the 65,000-64,500 region. As long as the Sensex sustains above this support, one more leg of rise to 67,000-67,700 is still a possibility. So broadly, 65,000-67,700 will be the medium-term trading range.
The outlook will turn bearish only if Sensex declines below 64,500. That looks less likely at least in the near future. Because a strong negative trigger would be needed to drag the Sensex below 64,500.
Nifty Bank (45,468.10)
Contrary to our expectation to see a rise to 47,000, the Nifty Bank index fell last week. The index failed to sustain above 46,000 and witnessed an intraday week fall below the support at 45,400. Nifty Bank index made a low of 45,238.80 and bounced from there to close at 45,468.10, down 1.32 per cent for the week.
Short-term view: Immediate outlook is slightly mixed. On the charts, there are some chances to see a rise back from current levels itself.
Immediate supports are at 45,340 – the 21-Day Moving Average and 45,250 – a trendline. If the index manages to sustain above these supports, a rise back to 46,000-46,300 can be seen this week.
On the other hand, a break below 45,250 can drag the index down to 44,700.
Overall, it is a wait-and-watch situation now. The price action in the initial part of the week will need a close watch to see if the Nifty Bank index is bouncing back or not.
Graph Source: MetaStock
Medium-term view: The big picture is bullish. The broad 44,000-43,000 region is a strong support. As long as the index stays above 43,000, the big picture is bullish. Nifty Bank index can surge to 48,650 in the coming months. A decisive break above 46,300 will pave way for this rally.
Dow Jones (35,459.29)
The Dow Jones Industrial Average rose to test the resistance at 35,600 in line with our expectation. The index made a high of 35,645.35 and has come down from there. It has closed the week at 35,459.29, up 0.66 per cent.
Graph Source: MetaStock
Outlook: The outlook remains bullish. Our view of seeing a rise to 36,000 remains intact. This rise can happen either from current levels itself or after a short-lived dip to 34,900-34,800. We will have to wait and watch.
Also, the region around 36,000 is an important resistance that can halt the current rally for now. So, the price action around 36,000 will need a close watch.
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