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The Indian benchmark indices witnessed a strong bounce last week. Sensex, Nifty 50 and the Nifty Bank index broke their supports initially, but did not get a strong follow-through selling. The indices bounced back sharply from their lows and have closed the week on a positive note. The intra-week price action also indicates that the indices are getting strong buyers at lower levels. That leaves the outlook positive for the Sensex, Nifty and Nifty Bank index for the coming week.
All sectoral indices ended in green last week. The BSE Capital Goods and BSE Realty indices outperformed by surging 9.99 per cent and 7.65 per cent respectively.
FPI action
The foreign portfolio investors (FPIs) continued to sell the Indian equities for the fifth consecutive week. They sold about $1.34 billion in the equity segment last week. The month of May has seen a net outflow of $3.38 billion so far. FPI selling could cap the upside in the Sensex and Nifty.
Nifty 50 (22,502)
Nifty fell to a low of 21,821.05 on Monday, but then has managed to rise back well for the rest of the week. Even the intraday fall on Thursday to 22,054.55 found strong buying in the market. Nifty has closed the week at 22,502, up 2.03 per cent.
Short-term view: The outlook is positive. Immediate support is around 22,300. Below that, 22,000 and 21,800 are the next important supports. Nifty can rise to 22,800-22,830 this week. The price action thereafter will need a close watch. A decisive break above 22,830 can see an extended rise to 23,150-23,200.
On the other hand, if the Nifty turns down from the 22,800-22,830 resistance zone, it can turn the outlook negative. In that case, Nifty can fall back to 22,500-22,300 again.
Broadly, 21,800-22,830 can be the short-term trading range which is intact for now. A breakout on either side of this range will then determine the next move.
Chart Source: MetaStock
Medium-term view: Last week, we said the chances of the rise to 23,200 and 23,650 are fading away. But the strong bounce from around 21,800 last week still keeps that chances alive. But for this rise to happen, Nifty has to breach 22,800 decisively. However, we continue to reiterate that more caution is needed if the Nifty heads up towards 23,000. We expect the upside to be capped at 23,650. As such, one has to look at the market from the sell side rather than becoming overly bullish when 23,200-23,650 levels are seen.
Nifty will come under more selling pressure only if it declines below 21,800. A sharp fall to 21,000 can be seen immediately. If the sell-off intensifies, then a break below 21,000 can drag the Nifty down to 20,000 and even 19,500. However, such a fall to 21,000 or 20,000-19,500 will be a very good buying opportunity from a long-term perspective.
Nifty Bank (48,199.50)
Nifty Bank index fell below 47,000, but did not sustain. The index made a low of 46,983.25 and then has risen back well from there. It has closed the week at 48,199.50, up 1.64 per cent.
Short-term view: The price action last week indicates that the Nifty Bank index has strong buyers around 47,000. This leaves the outlook bullish. Intermediate support can be in the 47,650-47,500 region itself. Nifty Bank index can rise to 49,200-49,500 this week. A break above 49,500 can see an extended rise to 49,900-50,000.
To negate this rise, Nifty Bank index has to get a decisive break below 47,000. If that happens, then the index can fall to 46,200-46,000 in the short term.
Chart Source: MetaStock
Medium-term view: The big picture remains bullish; 44,400 to 50,000 has broadly been the trading range since December last year. The chances are looking high now for the index to move up within this range in the short term. On the charts, the region around 46,000 and 44,500 are very strong supports. As such, we expect the Nifty Bank index to breach 50,000 and rise to 52,000-53,000 in the coming months. However, this rise may happen after some more time of consolidation in the current range. Any dip to 46,000 or 44,500 if seen, will be a very good buying opportunity from a medium-term perspective.
Sensex (74,005.94)
The support at 71,950 has held very well. Sensex fell to a low of 71,866.01 and then rose back sharply. It has closed the week at 74,005.94, up 1.85 per cent.
Short-term view: Outlook is bullish. Immediate support is at 73,450. Below that, 72,750 and 71,900 are the next important supports. Sensex can rise to 75,150-75,200 this week. If the index manages to breach 75,200, then an extended rise to 75,900 or even 76,200 is a possibility in the coming weeks. But a reversal from around 75,200 can drag the Sensex down to 73,500-73,000 and even lower again.
The short-term outlook will turn negative only if Sensex declines below 71,900. Such a break can drag it down to 70,600 or even 70,000.
Chart Source: MetaStock
Medium-term view: Sensex has been range bound between 71,800 and 75,100 since April. A sustained rise above 75,100 is necessarily needed to gain bullish momentum. Only in that case, the upside will open for a rise to 78,000-80,000 levels. As long as the Sensex remains below 75,100, it can remain vulnerable to break 71,800 and fall to 69,000 in the coming months. However, such a fall to 69,000 will be very good long-term buying opportunity.
Dow Jones (40,003.59)
The surge in the Dow Jones Industrial Average continues. The index rose for the fifth consecutive week. It was up 1.24 per cent last week. The index touched a new high of 40,051.05 before closing the week at 40,003.59.
Chart Source: MetaStock
Outlook: The view remains bullish. Immediate support is in the 39,700-39,600 region. Dow Jones can rise to 40,200-40,300 this week. A decisive break above 40,300 can boost the momentum. Such a break can clear the way for the index to touch 41,000 in the short term.
The Dow Jones will now have to decline below 39,500 tocome under pressure again. Only in that case, a fall to 39,000 will come into the picture.
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