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After trading weak for almost all through the week, the Indian benchmark indices witnessed a strong bounce on Friday. Sensex and Nifty 50 surged about 2.5 per cent each while the Nifty Bank index rose about 1.5 per cent on Friday recovering all the loss made during the week.
Friday’s rise has not changed the broader structure of the chart. The current downtrend is still intact. Also, key resistances are ahead for the benchmark indices which will have to be broken to indicate a trend reversal. Else, there is a danger of seeing a fall back again. So, the price action this week is going to be important, and we will have to wait and watch.
Among the sectors, barring the BSE Oil & Gas and BSE Power, other indices ended in green. These two indices were down 1.83 per cent and 0.23 per cent respectively. The BSE Realty index outperformed last week by surging 6.17 per cent.
Selling continues
The Foreign Portfolio Investors (FPIs) continue to sell Indian equities. Last week they sold about $487 million. For the month of November, the equity segment has seen a net outflow of about $3.15 billion. As long as the FPIs continue to sell, the Sensex and Nifty can remain subdued.
Nifty 50 (23,907.35)
The resistance at 23,850 held very well at the beginning of the week. Nifty rose to 23,780.65 in the first half of the week but then fell back sharply to make a low of 23,263.15. On Friday, the index surged recovering all the loss and closed the week at 23,907.35, up 1.59 per cent.
Short-term view: The downtrend is intact. Resistances are at 24,000 and 24,150 which can be tested this week if a follow-through rise happens. However, a strong and sustained break above 24,150 is needed to turn the outlook bullish. If that happens, the Nifty can rise to 24,600 and 24,700 in the short-term.
Failure to breach 24,150 can drag the Nifty down to 23,500 and 23,000 again in the coming weeks.
Broadly, 23,000-24,150 can be the wide trading range for the short-term.
Chart Source: MetaStock
Medium-term view: As mentioned last week 23,000 is a strong support. Below that 22,500 and 22,000 are the next important supports. The current fall can halt either at 23,000 itself or in the 22,500-22,000 region. A fresh leg of rise from 23,000 or 22,500-22,000 will have the potential to take Nifty up to 27,000 next year.
So, as the Nifty falls to 23,000 and lower, we have start looking at the market from the buy side and not panic at that time.
The bullish view will go wrong only if Nifty declines below 22,000. That can take it down at 21,000 and lower. For now, we are not looking for a break below 22,000.
Nifty Bank (51,135.40)
The support at 49,800 has held very well last week. Nifty Bank index made a low of 49,787 and then rose back sharply recovering all the loss. The index has closed at 51,135.40, up 1.9 per cent for the week.
Short-term view: The bounce last week keeps the short-term sideways range intact. The trading range has been 49,780-52,700. Within this range, the chances are high now for the Nifty Bank index to rise to 51,800 first and then to 52,600 eventually in the short term.
A breakout on either side of 49,780-52,700 will then determine the next leg of move. A break above 52,700 will be bullish to see 54,000 and higher levels. On the other hand, a break below 49,780 can take the Nifty Bank index down to 49,500-49,000.
Chart Source: MetaStock
Medium-term view: The big picture remains bullish. The broad 49,000-48,000 is a strong support zone. As long as the Nifty Bank index remains above this support zone, the bullish view of seeing 57,000-58,000 on the upside will remain intact.
The bullish view will go wrong only if the Nifty Bank index declines below 48,000. If that happens, a fall to 46,500-46,000 can be seen.
Sensex (79,117,11)
The break below 77,000 did not sustain last week. Sensex touched a low of 76,802.73 and then rose back sharply from there. It has closed the week at 79,117.11, down 1.98 per cent.
Short-term view: Resistance is in the 79,400-79,600 region which can be tested this week. But whether the Sensex extends the rise beyond 79,600 or not will decide the next move.
A break above 79,600 will be bullish to see a rise to 80,500-81,000. On the other hand, a reversal from the 79,400-79,600 region can drag the Sensex down to 78,000-77,000 again.
For now, we expect a trading range of 77,000-79,600.
Chart Source: MetaStock
Medium-term view: The chances of seeing an extended fall to 75,500-75,000 is still alive. Sensex has to rise above 81,000 from here in order to negate the above-mentioned fall.
However, from a big picture, the region between 75,500 and 75,000 is a strong support. A fall below 75,000 is less likely. As such a fresh leg of rally from the 75,500-75,000 region can take the Sensex to 80,000 first and then to 85,000 eventually in the coming months.
Dow Jones (44,296.51)
The fall to 42,900 almost happened as expected. The Dow Jones Industrial Average fell initially and made a low of 42,938,87. But after this fall, the index witnessed a strong rise in the second half of the week recovering all the loss. The index has closed the week at 44,296,51, up 1.96 per cent.
Chart Source: MetaStock
Outlook: There is room to rise from here. However, strong resistances are at 44,500 and 44,900 which can cap the upside. We expect the Dow Jones to reverse lower again from the 44,500-44,900 region. That fall will still keep alive our view of seeing 42,000-41,000 on the downside.
To negate this fall, the Dow Jones has to get a strong follow-through rise above 45,000.
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