The Indian benchmark indices fell over a per cent last week. The indices began the week on a positive note, but failed to get a strong follow-through rise. Sensex, Nifty 50 and the Nifty Bank index remained stable and higher initially but then started to fall in the second half of the week.
The sell-off intensified especially on Friday. This was contrary to our expectation to see a rise last week. The benchmark indices, the Sensex, Nifty 50 and the Nifty Bank index have closed the week near a crucial support. They have to see a strong bounce immediately from here in order to avoid more fall.
However, the sharp fall in the US markets of Friday might keep the sentiment negative and the indices vulnerable. As such, the chances of seeing more fall from here cannot be ruled out.
FPIs buy
The foreign portfolio investors (FPIs) bought the Indian equities last week. The equity segment witnessed a net inflow of about $1.31 billion. If the FPIs continue to buy, then that would aid in limiting the downside in the Sensex and Nifty 50, going forward.
Nifty 50 (24,852.15)
Nifty made a new high of 25,333.65 initially last week and then fell from there. After managing to sustain above the psychological 25,000-mark, the index fell sharply on Friday, breaking below the key support level of 24,900. It has closed the week at 24,852.15, down 1.52 per cent.
Short-term view: A crucial support is at 24,780 – the 21-Day Moving Average (DMA). Nifty has to sustain above this support to avoid more fall. A bounce from here and then a subsequent rise past 25,000 can ease the downside pressure.
Only then Nifty will gain strength to go back up to 25,450 in the near term. A decisive break above 25,450 will then bring back the earlier bullish view of seeing 25,800-25,900 on the upside.
But if the Nifty declines below 24,780 (the 21-DMA support), it will come under more pressure. That, in turn, can drag the Nifty down to 24,500 and 24,200 this week.
The region between 24,200 and 24,000 is a very important short-term support. The price action around 24,000 will need a very close watch to see if the Nifty is bouncing back or not. A fall below 24,000 will be an early sign of a trend reversal.
Medium-term view: The region between 24,000-23,800 is an important support. As long as the Nifty stays above this support zone, there is no danger for the broader uptrend. So, for now, we retain our broader bullish view of seeing 27,150 or 27,900 on the upside before a trend reversal is seen.
However, before this rise happens, the chances of a sideways consolidation between 24,000 and 25,500 cannot be ruled out.
This bullish outlook will get negated only if the Nifty declines below 23,800. If that happens, we can see a fall to 23,500-23,000 and even lower.
Nifty Bank (50,576.85)
Nifty Bank index broke the resistance at 51,600, but did not sustain. It made a high of 51,750.10 and then fell giving back all the gains. The index has closed the week at 50,576.85, down 1.51 per cent.
Short-term view: Immediate supports are at 50,400 and 50,250. If the Nifty Bank index manages to bounce back from either of these two supports, then that would ease the downside pressure. That can take the index back up to 51,000 and 51,500 again.
But a break below 50,250 can increase the downside pressure. Such a break can take the Nifty Bank index down to 49,700 this week.
The region around 49,700 is an important short-term support. Nifty Bank index will have to sustain above it to avoid more fall. On the upside, the region around 51,700 is an important resistance. The index has to surpass this hurdle to gain momentum and rise towards 52,000 and higher levels.
Medium-term view: The broader trend is up, but one leg of fall is still likely before a fresh rally begins. As seen from the monthly charts, a fall to 49,000-48,000 is still possible as long as the Nifty Bank index stays below 52,650. Such a fall will be a very good buying opportunity from a long-term perspective. We expect the Nifty Bank index to begin a fresh leg of rally from around 48,000. That will have the potential to take the index up to 54,000 and 57,000 over the long term.
Sensex (81,183.93)
Contrary to our expectation to see a rise to 83,500, Sensex fell last week. Indeed, it declined below the support at 81,600. The index has closed the week at 81,183.93, down 1.43 per cent.
Short-term view: Immediate support is in the 81,000-80,900 region. A break below 80,900 can take the Sensex down to 80,600 or 80,300 this week. Failure to bounce back from around 80,300 will turn the short-term outlook bearish. A break below 80,300 can then drag the Sensex down to 79,000-78,500 the coming weeks.
On the other hand, a strong bounce from around 80,600 or 80,300 will have the potential to take the Sensex up to 82,000-82,500 again. It will also keep the short-term bullish outlook intact to see 84,000-84,300 on the upside.
Medium-term view: The outlook is slightly mixed. The monthly candles indicate a possibility of a sideways range movement of 78,000-82,750. We can expect the Sensex to oscillate in this range for some time. A breakout on either side of this range will determine the next move.
A beak above 82,750 and a subsequent rise past 84,300 is needed to boost the bullish momentum. Sensex will come under pressure for a fall to 77,000-76,000 if it declines below 78,000.
Dow Jones (40,345.41)
The Dow Jones Industrial Average tumbled over 2 per cent last week erasing all the gains made in the previous two weeks. Our bullish view of seeing a rise to 42,000 had gone wrong. The Dow tumbled below 41,000 and has closed the week at 40,345.41, down 2.93 per cent.
Outlook: On the daily chart, the picture is weak. There is a cluster of resistances in the 40,500-40,750 region. So, a sustained rise above 40,750 is needed to turn the sentiment positive. Only then, the bullish view of seeing a rise to 42,000 will come back into the picture.
As long as the Dow stays below 40,750, the outlook will remain negative. A fall to 40,100-39,900 can be seen this week. A break below 39,900 will increase the danger of the fall extending to 39,500 and even 39,000 in the coming weeks.