The Indian benchmark indices continue to get beaten down. Sensex, Nifty 50 and the Nifty Bank index were all down over 2 per cent each. Among the sectors, barring the BSE IT index, which was up marginally by 0.25 per cent, all others fell last week. The BSE Power and BSE Metals indices fell the most. They were down 5.12 per cent and 5.02 per cent respectively.
The Foreign Portfolio Investors (FPIs) continued to sell the Indian equities last week. But comparatively, the quantum of selling was less last week. The FPIs pulled out about $287 million last week. For the month of November, the net outflow from the equity segment has been about $2.66 billion.
Last leg of fall
The fall last week in the benchmark indices were more in line with our expectation. There is some support near current levels. So, the chance of a corrective bounce in the near term is a possibility. However, the trend is still down and so the upside is likely to be capped. Sensex, Nifty and the Nifty Bank index have room to fall more from here. But from a long-term perspective, the fall from here could be the last leg of this correction.
Here, we look at the charts and see how far the indices can fall from here and where the reversal point is.
Nifty 50 (23,532.70)
As expected, Nifty declined breaking the 24,000-23,800 support zone last week. The index touched a low of 23,484.15 before closing the week at 23,532.70, down 2.55 per cent.
Short-term view: The trend is down but a near-term bounce is possible. Immediate support is at 23,450. If the Nifty manages to sustain above this support, a corrective bounce to 23,850 is possible. A break above 23,850 can trigger an extended rise to 24,000-24,100. However, a rise beyond 24,100 is unlikely.
A reversal either from 23,850 itself or from around 24,100 can take the index down to 23,500 again. A break below 23,450 can then drag the Nifty down to 23,100-23,000 in the coming weeks.
Broadly, the outlook is negative to see a fall to 23,000. This fall can happen from here itself or after a corrective bounce to 23,850 or 24,100.
Medium-term view: The region around 23,000 is a strong support. We expect the recent correction to halt there. A fresh leg of rally from around 23,000 will have the potential to take Nifty up to 25,000-25,500 again in the coming months. An eventual break above 25,500 thereafter will then clear the way for targeting 27,000 on the upside.
In case Nifty declines below 23,000, though less likely, the fall can extend to 22,500-22,000.
Sensex (77,580.31)
Sensex is heading down towards 77,000 in line with our expectation. The index made a low of 77,424.81 and has closed at 77,580.31, down 2.4 per cent last week.
Short-term view: Immediate supports are at 77,360 – the 200-Day Moving Average (DMA), and 77,000. A bounce from around 77,000 can take the Sensex up to 79,300 or 79,800. A rise beyond 80,000 looks less likely now, and it will need a strong positive trigger.
So, as long as the Sensex stays below 80,000, there is a danger of breaking below 77,000. This is contrary to our view last week when we said that the corrective fall can halt around 77,000.
A break below 77,000 can drag the Sensex down to 75,500-75,000 in the short term. To avoid this fall, Sensex has to sustain above 77,000 and rise past 80,000.
Medium-term view: As mentioned above, the chances are high to see an extended fall towards 75,500 or 75,000. However, the region around 75,000 is a strong long-term trend line support which might be difficult to break. So we can expect the Sensex to reverse higher again from anywhere in the 75,500-75,000 region. That will mark the beginning of a new leg of rally. It can have the potential to take the Sensex above 80,000 again targeting 85,000 and higher in the coming months.
Nifty Bank (50,179.55)
As expected, the Nifty Bank index fell within the range last week. Indeed, it fell well beyond 50,200 to make a low of 49,904.40. The index has risen back from this low to close the week at 50,179.55, down 2.68 per cent.
Short-term view: Immediate outlook is slightly unclear. Support is at 49,800. Resistance is around 50,650. So, 49,800-50,650 can be the trading range for some time. A breakout on either side will decide the next move.
A break below 49,800 can take the Nifty Bank index down to 49,000. On the other hand, if the index manages to breach 50,650, a rise to 51,500-52,000 can be seen.
Medium-term outlook: We reiterate that 49,000 is a strong support. Even if a break below 49,000 is seen, the downside can be limited to 48,500 or 48,000 maximum. So, a fall to 49,000 or 48,000 will be a good buying opportunity. As long as the Nifty Bank index stays above 49,000-48,000, the upside is open to target 57,000-58,000 in the coming months. A decisive break above 53,000-53,500 will clear the way for this rally.
Dow Jones (43,444.99)
The Dow Jones Industrial Average has turned down from near 44,500 in line with our expectation. The index touched a new high of 44,486.70 and has come down giving back all gains made during the week. It has closed at 43,444.99, down 1.24 per cent for the week.
Outlook: The short-term view is negative now. Resistance is in the 44,000-44,100 region. The Dow Jones can fall to 42,900-42,800 in a week or two. Any bounce will be capped at 44,100.
From a big picture, as long as the Dow Jones remains below 44,500, there are good chances to see a fall to 42,000-41,500 in the coming weeks.
