Nifty 50 and Sensex are struggling to rise. The indices were down 0.45 per cent and 0.61 per cent respectively. The price action in the first half of last week clearly indicates the absence of strong follow-through buyers to take the indices higher. The subsequent fall in the second half of the week keeps the doors open for the benchmark indices to fall more in the short term.
However, we reiterate that the big picture has not changed. On the charts, the recent fall that has been in place over the last three weeks is just a correction within the overall uptrend. Strong supports are there to halt the fall going forward and keep the broader uptrend intact. As such, we can expect the Nifty, Nifty Bank and the Sensex to begin a fresh leg of rally after some more fall from the current levels.
Among the sectors, the BSE Consumer Durables and BSE Metals index outperformed by surging 2.33 per cent and 1.05 per cent respectively. The BSE Bankex and BSE Realty indices fell the most. They were down 1.63 per cent and 1.42 per cent respectively.
The foreign portfolio investors (FPIs) bought the Indian equities last week. The equity segment saw an inflow of $640.8 million last week. This clearly indicates that the FPIs are buying the dips and it is a positive. As the FPIs continue to buy, the downside can be limited in the Sensex and Nifty, going forward.
Nifty 50 (19,428.30)
Nifty failed to get a sustained break above 19,600 last week. The index made a high of 19,645.50 and then fell sharply giving back all the gains in the second half of the week. Nifty has closed the week at 19,428.30, down 0.45 per cent.
Short-term view: The 21-Day Moving Average (MA), currently at 19,652, has capped the upside very well all through last week. Although there is support in the 19,330-19,300 region, the index looks vulnerable to break it. The price action on the daily chart leaves the chances high for the Nifty to break 19,300 this week. Such a break can take Nifty down to 19,150-19,100 and even lower.
In case, Nifty manages to sustain above 19,300, though less likely, it can bounce back to 19,600-19,650 again. A break above 19,650 can take it up to 19,750.
Medium-term view: The region between 19,100 and 19,000 is a very crucial support zone. We expect the Nifty to sustain above 19,000 and rise back again in the coming weeks. Such a bounce from 19,000 will take the Nifty up to 20,000-20,200 again.
The outlook will turn bearish only if the Nifty declines below 19,000. In that case, a fall to 18,600-18,400 can be seen. However, a new and strong negative trigger will be needed for the Nifty to break below 19,000.
Sensex failed to get a strong follow-through rise above 66,000 last week. It made a high of 66,067.90 and then fell to close the week in red for the third consecutive week. Sensex has closed at 65,322.65, down 0.61 per cent for the week.
Short-term view: The downward reversal failing to breach 66,000 last week leaves the outlook negative. The chances are high for the Sensex to break 65,000 and fall to 64,500-64,450 this week. The price action thereafter will need a very close watch.
A bounce from the 64,500-64,450 support zone will give a breather. In that case, Sensex can bounce back to 66,000 levels.
But a break below 64,450 will increase the downside pressure. Such a break can drag the index down to 64,000 and even lower.
Medium-term view: The levels of 64,450 and 63,800 are very crucial supports to watch. A strong bounce from either of these supports will keep the broader uptrend intact. So, as long as the Sensex stays above 63,800, the chances of it rising back to 67,800-68,000 over the medium term cannot be ruled out.
The outlook will turn bearish only on a strong break below 63,800. Such a break can take the Sensex down to 62,600 and even lower.
Nifty Bank (44,199.10)
Nifty Bank index failed to rise past 45,000 last week and declined sharply. Indeed, it has broken and closed below the key support level of 44,400. Nifty Bank index has closed at 44,199.10, down 1.52 per cent for the week. The index has tumbled over 4 per cent in the last three weeks.
Short-term view: The outlook is negative. The region between 44,450 and 44,600 will be a strong resistance. Any bounce can be capped at 44,600. The chances of rising past 44,600 immediately is unlikely as the price action looks very weak.
The Nifty Bank index can fall to 43,500 this week. A break below 43,500 can drag it further lower to 43,000 or even 42,700.
Medium-term view: The region around 42,700 is a strong medium-term support. A fall below 42,700 could be difficult at the moment. As such, we expect the Nifty Bank index to see a fresh leg of rally from around 42,700. That upmove will have the potential to take the Nifty Bank index up to 46,000 levels again. It will also keep the long-term bullish view of seeing 48,650 on the upside intact.
Dow Jones (35,281.40)
The Dow Jones Industrial Average managed to hold above the crucial support level of 35,000. However, the index did not see a break above 35,600. It oscillated between 35,000 and 35,600 all through last week. The index has closed at 35,281.40, up 0.62 per cent.
Outlook: The immediate outlook is unclear. 35,000-35,600 is the trading range as of now. A breakout on either side of this range will determine the next move.
A break above 35,600 can take the Dow Jones up to 36,000 and higher. On the other hand, a break below 35,000 can drag the index down to 34,800-34,700 and even 34,500 going forward. It is a wait-and-watch situation.