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The Indian benchmark indices opened the week on a weak note, but then managed to surge in the second half of the week. The Sensex, Nifty 50 and the Nifty Bank indices were all up over 2 per cent. This rise has reduced the danger of the fall that we had cautioned last week. The broader uptrend is intact. We can expect the Sensex and Nifty 50 to scale new highs, going forward. Nifty Bank index is also looking positive with a bullish pattern formation on the chart.
Among the sectors, the BSE Consumer Durables index outperformed last week by surging 4.5 per cent. The BSE Oil & Gas index was beaten down badly by 3.2 per cent.
Fed meeting
The US Federal Reserve meeting outcome on Wednesday will need a close watch. The market has already factored in a 25-basis points (bps) rate cut. The Fed’s economic projection and the future rate cut path (the dot plot) will need a close watch. That would set the tone for the equity markets going forward.
Foreign money flows
The foreign portfolio investors (FPI) continue to buy the Indian equities. Last week, the equity segment saw a net inflow of about $2 billion. The month of September has seen a strong inflow of about $3.31 billion so far. If this pace of buying continues, then the Sensex and Nifty can surge further from current levels.
Nifty 50 (25,356.50)
The initial break below the 21-Day Moving Average last week did not sustain. Nifty made a low of 24,753.15 on Monday and then had risen back very well from there. The index touched a new high of 25,433.35 on Thursday before closing the week at 25,356.50, up 2.03 per cent.
Short-term view: The outlook is bullish. The strong rise and a decisive close above 25,200 last week is a positive. Immediate support is around 25,300. Below that 25,150 and then 25,000-24,900 is a strong support for the Nifty.
Immediate resistance is around 25,470. The chances are high for the index to break the resistance this week. Such a break can take the Nifty up to 25,800-25,850 in a week or two.
Failure to breach 25,470 can keep the Nifty in a range of 24,900-25,450 for some time. The outlook will turn bearish only if the Nifty declines below 24,900. That can take the index down to 24,600 first and then even lower. But such a fall will need some strong negative trigger, which looks less likely at the moment.
Chart Source: MetaStock
Medium-term view: The overall uptrend remains intact. The region between 24,000 and 23,800 will continue to act as a strong support. Nifty has potential to target 27,150 or 27,900. These two levels are very crucial to watch going forward. We can expect the current uptrend to halt anywhere at 27,150 or 27,900 and a reversal is possible thereafter. So, as the Nifty goes above 27,000, we have to turn slightly cautious rather than becoming overly bullish.
Nifty has to fall below 23,800 to become bearish. Only then the fall to 23,000 and lower levels will come into the picture.
Nifty Bank (51,938.05)
The support at 50,400 held very well last week. The Nifty Bank index has risen back sharply after making a low of 50,369.40. It made a high of 51,994.10 before closing the week at 51,938.05, up 2.69 per cent.
Short-term view: The outlook is bullish. Immediate support is at 51,700. Below that 51,150, 50,900 and 50,650 are the next important supports. Nifty Bank index can rise to 52,600-52,700 in a week or two. The price action thereafter will need a close watch.
A reversal from the 52,600-52,700 region can drag the index down to 52,000 again. But a strong break above 52,700 will be very bullish to see 54,000 on the upside.
Chart Source: MetaStock
Medium-term view: The price action on the daily chart indicates an inverted head and shoulder pattern. This is a bullish pattern. That leaves the chances high for the Nifty Bank index to break 52,600 and see the rise to 54,000 mentioned above. The upside can extend even up to 54,500-54,800. That in turn will negate the danger of the fall to 49,000-48,000 that we have been mentioning for some time.
From a long-term perspective, an eventual break above 54,800 will then clear the way for a rally to 56,600-57,000.
To negate the bullish view, the Nifty Bank index has to fall below 49,800. That looks unlikely.
Sensex (82,890.94)
The support at 80,900 has held very well and the Sensex has risen sharply last week. The index made a low of 80,895.05 and surged back to make a new high of 83,116.19. It has come off slightly from that high to close the week at 82,890.94, up 2.1 per cent.
Short-term view: The outlook is bullish. Support is around 82,000. Sensex can rise to 83,800-84,000 or even 84,300 in the near term.
The 21-day moving average at 81,700 is an important support. Sensex will come under pressure only if it breaks below this support. If that happens, we can see a fall to 81,000-80,700.
Chart Source: MetaStock
Medium-term view: The region around 84,300 is a crucial resistance for the Sensex. Failure to breach this hurdle can drag the index down to 82,000-81,500.
A strong and sustained break above 84,300 will clear the way for a rally to 87,500-88,000. We will have to wait and watch.
Dow Jones (41,393.78)
The Dow Jones Industrial Average began the week on a negative note. The index fell to a low of 39,993.07, but then rose back sharply recovering all the loss. The Dow surged in the second half of the week and made a high of 41,533.84. It has closed the week at 41,393.78, up 2.6 per cent.
Chart Source: MetaStock
Outlook: The strong bounce and close above 41,000 is a positive. That has negated the danger of the fall we had cautioned last week. It has also brought back the earlier bullish sentiment.
The outlook is bullish to see a rise to 42,200. If the Dow manages to breach 42,200, the upside can extend up to 42,750-42,800 in the coming weeks. But a failure to break above 42,200 can trigger a corrective fall to 41,800-41,650.
On the charts, an inverted head and shoulder pattern getting formed. A decisive break above 42,200 will confirm the same. If that breakout sustains, then the Dow Jones will have the potential to target 44,000-44,500 on the upside in the coming months.
The outcome of the US Fed meeting on Wednesday will be a key event to watch, which can set the trend.
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