Index Outlook: Nifty 50, Sensex remain bullish

Nifty 50 and Sensex rose in line with our expectation last week. The Nifty Bank index, on the other hand, remained broadly stable and range-bound last week. Sensex and Nifty were up over a per cent each. The Nifty Bank index closed marginally higher by about 0.08 per cent.

The overall sentiment is positive. The benchmark indices have supports which can limit the downside in the coming days, if there is a dip from current levels. The broader uptrend remains intact. Sensex and Nifty can rise more from current levels in the coming weeks. Nifty Bank index has a possibility of seeing an intermediate short-lived dip before moving higher.

Among the sectors, barring the BSE FMCG index, down 0.22 per cent, others closed in green last week. The BSE Metals index outperformed by surging 7.11 per cent.

Strong inflows

The Foreign Portfolio Investors (FPIs) continue to pour money into the Indian equities. There was a net inflow of about $2.83 billion into the equity segment last week. The month of September has seen a whopping inflow of about $6.84 billion. Strong foreign money flows can continue to push the Sensex and Nifty 50 to new highs going forward.

Nifty 50 (26,178.95)

The rise to 26,200 happened last week as expected. Nifty touched a new high of 26,277.35 on Friday and fell back from there. It has closed the week at 26,178.95, up 1.5 per cent.

Short-term view: The outlook is bullish. Immediate resistance is around 26,400. A break above it can take the Nifty up to 26,800 and 26,950 in a week or two.

If the Nifty fails to breach 26,400 initially this week, a dip to 26,000, a strong support for the week is possible. A fall below 26,000 looks less likely. So, a bounce from around 26,000 can take the index up to 26,400 initially and then higher to 26,800-26,950 eventually in the coming weeks.

The region between 26,000 and 25,900 will be an important support zone. The short-term outlook will turn negative only if the Nifty declines below 25,900. Such a fall, though less likely, can take the Nifty down to 25,650-25,600.

Chart Source: MetaStock

Medium-term view: The trend is up and there is room to rise more from here. Nifty has the potential to target 27,400 or 27,950 in a month or two. Strong supports are at 25,300-25,100.

The price action after this rise will need a very close watch. We expect the current rally to find a top around 27,400 or 27,950. A reversal thereafter can trigger a corrective fall to 25,000 or 24,500. The chances of the correction extending beyond 24,500 will have to be seen based on the situation prevailing at that time.

So, as the Nifty goes above 27,000, more caution is needed. We will have to start looking at the market from the sell side at that time rather than being overly bullish.

Nifty Bank (53,834.30)

Nifty Bank index rose to a high of 54,467 but failed to sustain. The index fell on Friday giving back almost all the gains. It has closed the week at 53,834, up marginally by 0.08 per cent.

Short-term view: Immediate resistance is at 55,000. Nifty Bank index has to break this resistance to move further up. A break above 55,000 can take the index up to 55,650 or 55,800 this week.

But failure to breach 55,000 and a fall below 53,750 can take the index down to 53,200-53,000 first. A further break below 53,000 if seen, can drag it down to 52,600-52,500. In this case, we can expect the Nifty Bank index to reverse higher again either from 53,200 itself or after the extended fall to 52,600-52,500 and then rise towards 55,800.

Broadly, the Nifty Bank index can rise to 55,650-55,800 in the short-term. But whether this rise will happen from here itself or after a corrective dip remains a question.

Chart Source: MetaStock

Medium-term view: The upside is open to see 57,000-58,000 in the coming months as long as the index stays above 51,000. But as mentioned last week, series of resistances are there which can put intermediate pause during the rise.

Sensex (85,571.85)

Sensex rose well beyond our expected level of 85,600 last week. The index touched a high of 85.978.25 and then had come-off slightly from there. It has closed the week at 85,571.85, up 1.22 per cent.

Short-term view: The outlook is bullish. Support is in the 85,000-84,800 region which can limit the downside this week. Resistance is in the 86,300-86,350 region. A break above 86,350 can boost the bullish momentum. Such a break can take the Sensex up to 87,800 and 88,000 in the short-term.

The outlook will turn negative only if the Sensex declines below 84,800. If that happens, a fall to 84,000 is possible in the short-term .

Chart Source: MetaStock

Medium-term view: Sensex has strong supports at 84,000 and 82,000. As long as it stays above these supports, the uptrend will remain intact. The index can rise to 88,000-89,000 in the coming months. Thereafter a corrective fall is possible.

Supports to watch

Nifty: 26,000-25,900

Sensex: 85,000-84,800

Nifty Bank: 53,200-53,000

Dow Jones (42,313)

The Dow Jones Industrial Average is holding well above 42,000. The support at 41,900 has held very well as expected. The index dipped to a low of 41,859.73 and then had risen back well from there. It surged to a high of 42,628.32 on Friday before closing at 42,313, up 0.59 per cent for the week.

Chart Source: MetaStock

Outlook: The view remains bullish. Strong supports are there at 42,000 and 41,700. Immediate resistance is at 42,400. A sustained break above it can strengthen the momentum. Such a break can take the Dow Jones up to 43,000 in the short-term.

The index will come under pressure for a fall only if it declines below 41,700. If that happens, then the Dow Jones can fall to 41,400 and 41,200.

From a big picture, as long as the Dow Jones stays above 41,000, the outlook will remain bullish. The index has potential to target 44,300 on the upside in the coming months. Thereafter a reversal is possible.