Index Outlook: Sensex, Nifty 50 consolidate as the fall pauses

Nifty 50 and Sensex remained broadly stable, and range bound all through last week. Both the indices were slightly up by 0.5 per cent and 0.4 per cent respectively for the week. The Nifty Bank index on the other hand rose initially but then failed to sustain the momentum. It outperformed the Sensex and Nifty by rising about 1.75 per cent last week.

Broadly, this sideways consolidation looks like a pause within the current downtrend. As such, we retain the view of seeing one more leg of fall from here before the broader uptrend resumes.

Among the sectors, BSE IT and BSE Consumer Durables indices were down by 2.9 per cent and 0.05 per cent respectively. Other sectoral indices ended the week in green. The BSE Capital Goods and the BSE PSU indices outperformed by surging 4.74 per cent and 4.35 per cent respectively.

The US Presidential Elections this week on November 5 will be an important event to watch. The election outcome can cause some volatility this week.

Sell-off continues

The Foreign Portfolio Investors continue to sell Indian equities. Last week, they sold about $978 million. For the month of October, there has been a net outflow of about $11.19 billion from the Indian equity segment. The FPIs have to start buying the equities in order to support the benchmark indices to halt the fall and reverse higher again.

Nifty 50 (24,304.35)

Nifty is oscillating between 24,000 and 24,500. The index has closed the week on a mixed note at 24,304,35, up 0.51 per cent.

Short-term view: The immediate outlook is unclear. A sideways range of 24,000-24,500 (narrow) or 24,000-24,700 (broad) looks likely to remain in place for some time. A breakout on either side of 24,000-24,700 will then determine the next leg of move.

A break above 24,700 can ease the downside pressure. It will take the Nifty up to 25,100 and mark the end of the correction. A further break above 25,100 will then take it up to 25,300-25,350 in the short term.

On the other hand, a break below 24,000 will trigger a fresh fall towards 23,500 and even 23,000.

Chart Source: MetaStock

Medium-term view: As long as the Nifty stays below 24,700, the corrective fall will still remain intact. As such, the chances of seeing 23,500-23,000 on the downside is still alive.

However, a break below 23,000 is less likely. We expect the Nifty to resume its overall uptrend from around 23,000 and target 26,000-27,000 on the upside in the coming months.

The bullish view will go wrong only if the Nifty declines below 23,000. If that happens, there can be an extended fall to 22,000 and 21,000.

Sensex (79,724.12)

Sensex has been range bound between 79,000 and 80,500 for some time now. Within this range, the index has closed the week at 79,724.12, up 0.41 per cent.

Short-term view: Sensex can continue to oscillate in a wide range of 79,000-81,000. A strong rise past 81,000 is needed to turn the outlook bullish. Only then a rise back to 82,000-83,000 and higher levels will come back into the picture.

As long as the Sensex stays below 81,000, the bias will remain negative to break 79,000. Such a break will trigger a fresh leg of fall to 78,000 in the short term.

Chart Source: MetaStock

Medium-term view: The region around 77,500-77,000 is a strong support. We can expect the current fall to halt here. A fresh rise from around 77,000 will indicate the resumption of the broader uptrend. It can then take the Sensex to 88,000 over the medium term.

This view will go wrong if the Sensex declines below 77,000. If that happens, a fall to 75,000 is possible.

Nifty Bank (51,673.90)

Nifty Bank index has been stuck in between 50,200 and 52,600 over the last four weeks. Within this range, it rose to a high of 52,354.85 last week and has come down from there. The index has closed the week at 51,673.90, up 1.75 per cent.

Short-term view: The immediate outlook is unclear. A slightly broader range of trade can be 50,000-53,000. A break below 50,000 can take the index down to 49,500 or 49,300. On the other hand, a sustained rise above 53,000 is needed to boost the bullish momentum. That in turn will clear the way for a rise to 54,000-55,000 in the short term.

As seen from the charts, a test of 49,500-49,300 first looks likely before the Nifty Bank index moves above 53,000.

Chart Source: MetaStock

Medium-term view: The big picture remains positive for the Nifty Bank index. Strong support is around 49,000. As long as the index stays above this support, the medium-term outlook is bullish. We retain our view of the Nifty Bank index targeting 57,000-58,000 in the coming months.

A sustained break below 49,000 is needed to negate the bullish view. Only then a fall to 47,000 and lower levels is possible. But, such a fall looks unlikely.

Dow Jones (42,052.19)

The Dow Jones Industrial Average remained below the resistance at 43,500 all through the week. It fell to a low of 41,704.63 on Thursday before rising back on Friday. The index has closed the week at 42,052.19, down 0.15 per cent. The price action last week clearly indicates that the market is positioning itself ahead of the US Presidential Election this week on Tuesday, November 5.

Chart Source: MetaStock

Outlook: On the charts, the Dow Jones looks slightly vulnerable for a fall in the short term. Resistance is in the 42,500-42,600 region. A strong rise past 42,600 is needed to bring back the bullish momentum. Only then the rise to 44,000-44,500 will come back into the picture.

As long as the Dow stays below 42,600, there is a danger of a fall to 41,000 in the short term. Thereafter a fresh leg of rally will take the Dow Jones up to 43,000 and higher.

Broadly, the Dow Jones has potential to target 44,000-44,500 on the upside. But whether this rise is going to happen from here itself or after a fall to 41,000 remains a question. We will have to wait and watch.

Trading range

Nifty: 24,000-24,700

Sensex: 79,000-81,000

Nifty Bank: 50,000-53,000