Global equity markets are still under pressure. In the US, the Dow Jones Industrial Average continues to get beaten down badly and that in turn keeps the overall sentiment nervous. Sensex and Nifty, the Indian benchmark indices are however continuing to show resilience. The Sensex and Nifty 50 witnessed a sharp bounce on Friday after the Reserve Bank of India’s monetary policy outcome. That aided the indices to recover most of the loss. Sensex and Nifty were down over a per cent for the second consecutive week, while the Dow Jones tumbled 3 per cent last week.
Among the sectors, the BSE Health Care and BSE IT indices outperformed by rising 1.76 and 1.3 per cent respectively. The BSE Power index, down 4.69 per cent, was the worst performer.
Watch | Nifty Prediction for 3-7 October, 2022
FPIs sell-off
The Foreign Portfolio Investors (FPIs) had sold the Indian equities for the second consecutive week. They sold $1.99 billion in the equity segment last week. The month of September has seen a net outflow of $903 million. If the FPI sell-off intensifies, then the benchmark indices can remain under pressure.
Nifty 50 (17,094.35)
Nifty opened the week with a wide gap-down on Monday and continued to fall. However, it was not getting a strong follow-through selling below 16,800 since Wednesday. The index made a low of 16,747.70 on Friday and has risen back sharply recovering most of the loss. Nifty has closed the week at 17,094.35, down 1.34 per cent.
The week ahead: The sharp rise seen on Friday is likely to be short-lived. Resistances are at 17,400 — a trendline and at 17,545 — the 21-Day Moving Average (MA). The upside can be capped at either of these resistances. Nifty has to breach 17,545 decisively to become bullish and revisit 18,000 levels. But that is unlikely as of now considering weakness in the global markets.
Support is at 16,753 — the 21-Week MA which has held well last week. A break below it can drag.the Nifty down to 16,640 or even 16,296 — the 50 and 61.8 per cent Fibonacci retracement supports in the short term.
Medium-term outlook: The 100-Week MA support at 16,150 is a very crucial support to watch. As long as the Nifty stays above this support, there is not much danger for it. We see high chances for the Nifty to sustain above 16,150 and see a fresh rally in the coming weeks. That rally will gain momentum on a strong break above 18,100 — a key resistance to watch on the upside. Such a break will pave way for a test of 19,500-19,600 initially and then to 20,500 eventually in the coming months.
Only a break below 16,150 will negate the bullish outlook. That in turn will increase the danger of a fall to 15,000 again.
Sensex (57,426.92)
Sensex broke below the support at 57,300 and fell to test 56,000 as expected. It made a low of 56,147.23 on Friday and has risen back sharply recovering most of the loss. Sensex has closed the week at 57,426.92, down 1.16 per cent.
The week ahead: Resistance are at 58,000 and 58,400. A much higher resistance is at 58,850. We expect the upside to be capped for now.
Support is in the 56,200-56,000 region. The chances for the Sensex to break below 56,000 and fall to 55,000-54,500 are looking high in the short term.
Medium-term outlook: The region between 54,200 and 54,000 is an important medium-term support. We expect the downside to be limited to 54,000 for now. As long as the Sensex sustains above 54,000, the broader outlook is bullish. We expect the Sensex to see a fresh rally in the coming weeks that will have the potential to breach 60,500 — a key medium-term resistance level. That break will pave way for a rise to 64,000 on the Sensex over the medium term.
This bullish outlook will get negated only if the Sensex falls below 54,000. In that case, the Sensex will come under immense pressure to see 50,000-49,000 on the downside.
Nifty Bank (38,631.95)
Contrary to our expectation, the Nifty Bank index fell breaking below the support at 38,200 last week. It made a low of 37,386.35 and has risen back sharply on Friday. The index has closed at 38,631.95, down 2.3 per cent for the week.
The immediate outlook is mixed. Resistance is at 39,476 — the eight-Week Moving Average (MA). The next resistance is at 39,932 — the 21-Day MA. Supports are at 37,000, 36,980 and 36,690.
Overall, we expect the Nifty Bank index to oscillate in a wide range of 36,500-40,000 for a few weeks before a clear trend emerges.
Trading strategy: The stop-loss at 38,870 on the long positions taken at an average level of 40,083 has been hit. We prefer to stay out of the market for some time.
Global cues
The Dow Jones Industrial Average (28,725.51) has been beaten down badly for the third consecutive week. The index has declined and closed below the key support level of 28,900. It has closed down 2.92 per cent for the week at 28,725.51.
The outlook remains bearish. Strong resistance is in the 29,300-29,500 region. Supports for the week are at 28,425 — a trendline, and at 28,150 — a moving average. We expect the downside to be limited to 28,150.
However, in the worst case, if the Dow declines below 28,150 also, there can be an extended fall to 27,583 — the 50 per cent Fibonacci retracement levels, and even 27,000 – a trendline. So broadly, we see that the wide range of 28,500-27,000 will be the strong support zone where the Dow can possibly find a bottom. The Dow Jones will be a good buy in this 28,500-27,000 zone from a long-term perspective.