Global equity markets are under pressure. The fear of a recession in the US has resurfaced after some weak economic data releases last week. The trigger for the fall came initially on Thursday after the weak US Purchasing Managers Index (PMI) data. That triggered a sharp sell-off in the Dow Jones Industrial Average which, in turn, has spilled over to the global equities. The Dow Jones has declined over 2 per cent last week. In India, the Sensex and Nifty 50 were down about 0.4 per cent each.
The US jobs data on Friday has added fuel to the sell-off. This coupled with the escalating geo-political tensions in West Asia can continue to keep the equities under pressure. We can expect the sell-off in equities to continue, going forward.
Nifty and Bank Nifty Prediction for the week 05 Aug’24 to 09 Aug’24 by BL GURU
Sector performance
Among the sectors, the BSE Realty and BSE IT indices fell the most. They were down 3.74 per cent and 2.88 per cent respectively. The BSE Power index outperformed by surging over 4 per cent. The BSE Healthcare and BSE Oil & Gas indices were up over a per cent each.
FPI flows
The foreign portfolio investors (FPIs) were net sellers of Indian equities last week. The equity segment saw a net outflow of about $280 million. However, the month of July has seen a net inflow of about $3.87 billion. It is important to see how the FPIs are going to position themselves under the current circumstance. That would be key in influencing the movement in the Sensex and Nifty, going forward.
Nifty 50 (24,717.70)
Nifty broke above 25,000, but did not sustain. It touched a high of 25,078.30 on Thursday. But the index fell sharply on Friday following the sell-off in the global markets and gave back all the gains. Nifty has closed at 24,717.70, down 0.47 per cent for the week.
Short-term view: The bias is turning negative. The reversal has happened from an important trend resistance near 25,100. Immediate resistance will be at 24,750. Nifty can fall to 24,450 initially this week. A break below it can drag it down to 24,100 – an important short-term support.
The chances are high for the Nifty to bounce from around 24,100 towards 24,450. The price action there after will need a close watch to see if the bounce sustains or not. That will be very important in deciding whether the Nifty can retain its uptrend or will run into a steeper correction.
For now, Nifty has to breach 24,750 first and then get a subsequent rise above 25,000 to turn the sentiment positive again. That looks less likely atleast for the next one or two weeks.
Medium-term view: The recent turnaround could just be a correction within the overall uptrend. The region between 24,000 and 23,900 will be an important support zone. A break below it can drag the Nifty down to 23,500-23,000 in the coming weeks. If the sell-off intensifies and drags the Nifty below 23,000, then a steeper fall to 22,000-21,800 is a possibility.
However, from a long-term perspective, the fall to 22,000 will be a very good buying opportunity. A fresh leg of rally from around 22,000 may have the potential to target 27,000-28,000 on the upside.
As the Nifty falls below 23,000, we have to start looking at the market from the buy side rather than becoming overly bearish.
Sensex (80,981.95)
Sensex failed to get a sustained break above 82,000 last week. It made a high of 82,129.49 and fell giving back all the gains. The index has closed the week at 80,981,95, down 0.43 per cent.
Short-term view: The immediate outlook is negative. Resistance is around 81,550. Support is at 80,650. A break below this support can take the Sensex down to 80,000 and even 79,500 this week. After this fall, a bounce-back move to 80,500-81,000 is a possibility.
Sensex has to rise above 82,000 decisively to bring back the bullishness. Only then a rise to 83,000-83,500 will come into the picture.
Medium-term view: Crucial support is in the 80,000-79,500 region. Sensex will come under more selling pressure if it declines below 79,500. If that happens, a fall to 77,000-76,500 can be seen. Thereafter, we can expect a fresh bounce in the Sensex towards 80,000 and higher.
In case the fall extends beyond 76,500, then 74,500 can be seen on the downside. But for now, we would prefer the downside to be limited to 76,500.
Nifty Bank (51,350.15)
Nifty Bank index has come down failing to breach the 52,000-52,500 resistance zone. The index made a high of 52,340.25 and has come down from there. It has closed the week at 51,350.15, up 0.11 per cent for the week.
Short-term view: Nifty Bank index is stuck in between 50,500 and 52,500. Within this range, the index can fall to 50,500 this week. A break below 50,500 can take the index down to 50,000 initially. A further break below 50,000 will see the fall extending towards 49,500 and even 49,000 in the coming weeks.
In case, the Nifty Bank index manages to bounce from around 50,500, then the 50,500-52,500 range can continue to remain intact.
A decisive rise above 52,500 is needed to see a rise to 53,000 and 53,500.
Medium-term view: The broader trend is still up. Even if the above-mentioned fall to 49,000 happens, it will not change the structure of the chart. The broad region between 49,000 and 48,000 is a very strong support for the Nifty Bank index. As long as the index trades above this support zone, the big picture will remain bullish.
From a long-term perspective, Nifty Bank index can target 56,000-57,000 on the upside. So, a fall to 49,000-48,000 will be a very good buying opportunity.
Dow Jones (39,737.26)
Dow Jones has been struggling to get a strong follow-through rise above 41,000 for some time now. The index rose to a high of 41,198.63 and then tumbled towards the end of the week. It has closed at 39,737.26, down 2.1 per cent.
Outlook: The short-term outlook has turned negative. Immediate resistance is at 39,850. Above that, the region around 40,350 is a strong resistance.
Support is at 39,200. But the index looks vulnerable to break it. Such a break can drag the Dow Jones to 38,200 in the coming weeks.
In case the index manages to sustain above 39,200 and moves up, the upside will be capped at 40,350.