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Sensex and Nifty 50 have risen back sharply from their lows last week. Both the indices have closed higher by about a per cent each last week. The strong rise and close on Friday have reduced the danger of the corrective fall that we had cautioned last week. That leaves the broader uptrend intact.
The Nifty Bank index, on the other hand, continues to underperform. The index was down about 2 per cent last week. However, the Nifty Bank index has bounced back from just above a very important support. So, it is important for the index to get a strong follow-through rise from here.
The BSE Realty and BSE Bankex were the only two sectors that ended in red last week. They were down 1.69 per cent and 2.54 per cent respectively. The BSE Power and BSE Healthcare indices outperformed by surging 5.53 per cent and 5.30 per cent respectively.
FPI flows
The foreign portfolio investors (FPIs) were net buyers of Indian equities last week in spite of selling in the second half of the week. The equity segment saw a net inflow of $349 million. The month of July has seen a net inflow of about $4 billion. Continuing foreign money flows can aid the Sensex and Nifty to scale new highs, going forward.
Nifty 50 (24,835.85)
Nifty remained lower almost all through last week. However, on Friday, the index witnessed a sharp rise covering all the loss. Nifty has closed the week on a strong note at 24,835.85, up 1.24 per cent.
Short-term view: The outlook is bullish. Immediate support is at 24,650. Below that, 24,400 and 24,200 are the next important supports. Nifty can rise to 25,200-25,300 this week. An intermediate correction from around 25,300 towards 25,000-24,700 cannot be ruled out. But an eventual break above 25,300 can take the Nifty up to 26,000-26,100 in the short term.
The short-term outlook will turn bearish only if the Nifty breaks below 24,200. If that happens, then a fall to 23,700 can be seen. But such a fall looks unlikely at the moment.
Graph Source: MetaStock
Medium-term view: The broader uptrend is intact. The region between 23,700 and 23,500 will be a strong support now. As long as the index stays above this support zone, the outlook will remain bullish. Nifty can rise to 27,150 (this quarter) and even 27,900 (if the rally extends into the next quarter) in the coming months. Intermediate resistances are at 26,300 and 26,800.
The above-mentioned rise will get negated only if the Nifty declines below 23,500. That break, though less likely now, can drag the Nifty down to 22,500 and lower.
Nifty Bank (51,295.95)
Nifty Bank index broke the 52,000-53,000 range on the downside. That break dragged the index down to test the support level of 50,500 as expected. Nifty Bank index made a low of 50,438.30 and then has risen back recovering some of the loss. It has closed the week at 51,295.95, down 1.86 per cent.
Short-term view: The bounce last week has given some breather. The support at 50,300 has held very well.
But that has not yet turned the outlook bullish for the Nifty Bank index. If the bounce sustains, a further rise to 52,000-52,500 is possible this week.
The price action thereafter is going to be very crucial. A strong rise above 52,500 is needed to turn the sentiment positive. Only then the outlook will become bullish for a rise to 53,500-54,000 in the short term.
In case the index fails to breach 52,500 and turns down, it can fall back to 50,500-50,300 again. In that case, 50,300-52,500 can be the trading range for some time. The index will come under more selling pressure if it breaks below 50,300. Such a break can drag it down to 49,500.
Graph Source: MetaStock
Medium-term view: The region around 50,300 is a very strong support. As long as the index stays above this support, the bias will remain bullish. The region around 53,500 is an important resistance. A break above it can take the Nifty Bank index up to 55,500-56,000.
The medium-term outlook will turn bearish if the index breaks below 50,300. Such a break can drag the Nifty Bank index down to 49,000-48,000.
So, if the index reverses lower from around 52,500 in the coming weeks, then the price action around 50,300 will need a very close watch.
Sensex (81,332.72)
The support at 79,200 has held very well last week. Sensex made a low of 79,224.32 and has risen back well from there, recovering all the loss. The index has closed the week at 81,332.72, up 0.9 per cent.
Short-term view: The outlook is bullish. Sensex can rise to 82,000 initially. A break above 82,000 can take it further up to 82,500-82,700 and even 83,000 in the short term.
Immediate support is at 80,000. Below that, 79,200 will continue to act as a strong support. The view will turn negative only if the Sensex declines below 79,200. In that case, a fall to 78,000 is possible.
Graph Source: MetaStock
Medium-term view: Sensex has important resistances at 83,000 and 83,800, which can be tested in the coming weeks. A reversal from either of these resistances can have the potential to drag the Sensex down to 78,000-77,000 in the coming months.
It is to be noted that unlike the Sensex, Nifty does not have any specific resistance nearby. So, either a reversal in the Sensex (if it happens) will drag the Nifty lower, or the rise in Nifty towards 26,000-27,000 will take the Sensex beyond the 83,000-83,800 hurdles. It will be interesting to see as which one of these two is going to happen.
Dow Jones (40,589.34)
The Dow Jones Industrial Average fell sharply by about 2 per cent in the first half of the week. The index made a low of 39,807.45 and then managed to rise back and recover all the loss in the second half. It has closed the week at 40,589.34, up 0.75 per cent.
Graph Source: MetaStock
Outlook: The strong recovery from the low and the decisive close above 40,300 is a positive. Supports for the week are at 40,300, 40,100 and 39,900. The chances are high for the index to sustain above 40,300 this week. A strong follow-through rise from here can take the Dow Jones up to 42,000-42,200 in the next few weeks.
The short-term outlook will turn negative only if the index breaks the support at 39,900. Such a break can drag the Dow Jones down to 39,100-39,000 initially. It will also keep the index under pressure to see 38,300-38,200 on the downside.
But considering the strong bounce seen last week, a fall below 39,900 looks less likely.
The outcome of the US Federal Reserve meeting on Wednesday will be an important event to watch
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