The US equity markets are on fire. The Dow Jones Industrial Average had surged over 5 per cent last week. The expected rally to 32,800 on the Dow has happened much faster than expected in just one week. The index is now poised at a very crucial trend-deciding resistance level.
On the domestic front, the Indian benchmark indices, the Sensex and Nifty 50 opened with a gap-up. But they failed to get a strong follow-through rally. Sensex and Nifty remained broadly in a sideways range and has closed over a per cent for the week.
Nifty Prediction for the week October 31 to November 4, 2022
Among the sectors, barring the BSE IT (down 0.04 per cent) and BSE FMCG (down 0.89 per cent), all other indices closed in green last week. The BSE Auto index outperformed, surging 3.91 per cent. The BSE Oil & Gas, PSU and Capital Goods indices were up in the range of 3.22-3.26 per cent.
Nifty 50 (17,786.80)
As expected, Nifty 50 broke above 17,600 last week. However, it has failed to see a sustained break above 17,800. The index made a high of 17,838.90 on Friday and has closed the week at 17,786.80, up 1.2 per cent.
The week ahead: A gap-up open above 17,800 is possible on the back of the strong surge in the Dow Jones seen on Friday. In that case, 17,800 can turn into a good near-term support. That can take the Nifty up to 17,950 initially and then to 18,050-18,100 eventually.
The level of 18,100 is a very crucial short-term resistance which will need a close watch. Inability to breach 18,100 can trigger a corrective fall to 17,800 and even 17,600 again.
However, the overall picture is positive. Strong support is in the 17,600-17,500 region, which can limit the downside in the short term.
Medium-term outlook: We retain our broader bullish view. The chances are high for the Nifty to break above 18,100 if not immediately this week, but eventually in the coming weeks. Such a break can take the Nifty up to 18,600 initially and then to 19,200 eventually.
We reiterate that, from a long-term perspective, the break above 18,100 will have the potential to take the Nifty up to 20,500 in the coming months. So, it is a good time for long-term investors to enter the market.
The bullish outlook in Nifty will come under threat only if the index falls below the 21-Week Moving Average support poised at 16,985. But that looks less probable as seen from the charts now.
Sensex (59,959.85)
The rally to 60,400-60,500 mentioned last week is yet to happen. Sensex moved up last week but failed to get a strong follow-through rise above the psychological 60,000-mark. It made a high of 60,133.17 and has come off from there to close at 59,959.85, up 1.1 per cent.
The week ahead: Sensex can open the week with a gap-up above 60,000. If that sustains, then the chances are very high to see a test of 60,400-60,500 and even 60,700 this week. In that case, 60,000 can then act as a good support.
Below 60,000, the region between 59,500 and 59,000 is a strong support zone. Sensex will come under pressure only if it falls below 59,000. In that case, a fall to 58,500 and lower levels is possible. But such a fall is unlikely at the moment.
Medium-term outlook: The bigger picture is positive. We retain our view of the Sensex breaking above 60,500. Such a break and subsequent rise past 61,000 will boost the bullish momentum and take it up to 61,500-62,000 initially and then to 63,500-64,000 eventually in the coming months.
In case the Sensex fails to breach 60,500 or 61,000, then a corrective fall to 60,000-59,500 is a possibility.
The 21-Week Moving Average poised around 57,000 is the important medium-term support which has to be broken to bring the Sensex under pressure.
Nifty Bank (40,990.85)
Nifty Bank index struggled to break above 41,500 last week. The index made a high of 41,530 and has come off from there to close the week marginally (0.51 per cent) higher at 40,990.85.
The overall outlook remains bullish. Strong supports are at 40,540 and 40,440. The chances are high for the Nifty Bank index to break above 41,500 and rise to 41,850 initially. A further break above 41,850 will then pave way for an extended rise to 42,450-42,500 in the coming weeks.
From a medium-term perspective, 42,500 is a very crucial resistance. The Nifty Bank index has to surpass this hurdle to gain bullish momentum and rally to 43,000-44,000 levels in the coming months.
Global cues
The Dow Jones Industrial Average (32,861.80) has risen sharply to test 32,800 as expected. However, this rally has happened much quicker than expected within a week itself. The Dow has surged 5.72 per cent last week and is up a whopping 14.4 per cent in the last four weeks.
A crucial resistance is just above current levels at 32,875. Above that 33,300-33,400 is the next strong resistance zone. Considering the continuous rise over the last four weeks, the chances of seeing a corrective fall cannot be ruled out. It has to be seen if this correction is happening from 32,875 itself or from the 33,300-33,400 resistance zone. That correction can take the Dow down to 32,400-32,200 and even lower towards 31,400.
The 21-Week Moving Average support at 31,400 will now be a very crucial support to watch. The Dow has to sustain above it in order to keep the uptrend intact. If the corrective fall is limited to 31,400 and the Dow reverses higher again, then that will be very bullish. In that case, the chances of breaking above 33,400 will remain high. Such a break will confirm a trend reversal and take the Dow up to 35,000 over the medium term.