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HomeInvestmentNifty 50 and Sensex can dip before fresh rally

Nifty 50 and Sensex can dip before fresh rally


Nifty 50 and Sensex began the week on a strong note with a sharp rise. However, they lost momentum and fell for the rest of the week. Although the indices bounced well from their lows on Friday, there is still room left on the downside. On the contrary, the Nifty Bank index managed to stay stable and was range bound last week. The index closed the week on a positive note. Relatively, the Nifty Bank index is looking more bullish than the Sensex and Nifty.

Among the sectors, some managed to close the week in green while many were in red. The BSE Realty and BSE IT indices outperformed. The indices were up 1.28 per cent and 1.16 per cent last week. The BSE Oil & Gas and BSE Power index were beaten down the most. They were down 2.07 and 2.39 per cent respectively.

FPIs Buy

The foreign portfolio investors (FPIs) continue to buy Indian equities. The equity segment saw an inflow of about $946 million last week. For the month of May, the FPIs have pumped about $3.88 billion into the Indian equity segment. This will continue to be a strong supporting factor for the Indian benchmark indices.

Nifty 50 (18,203.40)

Nifty 50 surged to a high of 18,458.90 on Monday. But thereafter it lost momentum and fell, giving back all the gains. The index fell to a low of 18,060.40 on Friday and then bounced back well to close the week at 18,203.40, down 0.61 per cent.

The week ahead: The bounce from the low of 18,060.40 on Friday is significant as it has happened from the 21-Day Moving Average support. However, it is important to see if the Nifty can sustain this bounce or not.

Immediate resistance is at 18,300. A break above it can take the Nifty up to 18,600-18,700 in a week or two. But failure to breach 18,300 can continue to keep the index under pressure. In that case, a fall to 18,000-17,900 can be seen first. Thereafter, a fresh leg of rally can target 18,600-18,700 on the upside.

Overall, the outlook is bullish to see 18,600-18,700. But whether the rise will happen from here itself or after a fall to 18,000-17,900 is not very clear for now.

Graph Source: MetaStock

Graph Source: MetaStock

Medium-term outlook: The medium-term view is bullish. 18,000-17,800 will continue to act as a strong support zone. Nifty can target 19,000 over the medium term. An eventual break above 19,000 will open the doors to target 20,000-20,500 over the long term.

The bullish outlook will get negated if the Nifty declines below 17,800. In that case, a fall to 17,500-17,300 can be seen. A break below 17,300 will confirm the trend reversal. But such a fall looks unlikely in the absence of any new negative news.

Sensex (61,729.68)

Sensex tested 62,500 and then has come-off sharply. It made a high of 62,562.67 on Monday and then fell, giving back all the gains. The index closed the week at 61,729.68, down 0.48 per cent.

The week ahead: The 21-Day Moving Average at 61,200 held well last week. But there is an immediate resistance at 62,000. Sensex has to rise past 62,000 to bring back the bullishness. In that case, Sensex can rise to 63,000-63,500 in a week or two.

On the other hand, if Sensex fails to rise past 62,000, it can test the support at 61,200 again. A break below it can take the index down to 60,800 and even 60,500 in the coming days. Thereafter, a fresh leg of rally can begin which can target 63,000-63,500 on the upside.

Graph Source: MetaStock

Graph Source: MetaStock

Medium-term outlook: Strong support is in the 60,500-60,000 region. As long as the Sensex stays above this support zone, the outlook is bullish. Sensex can target 64,000 over the medium term.

From a long-term perspective, Sensex has potential for a rally to 66,000-68,000 in the coming months. Sensex has to fall and sustain below 60,000 to negate this bullish outlook. But that looks less likely.

Nifty Bank (43,969.40)

The Nifty Bank was broadly range bound last week. The index rose to a high of 44,151.70 initially and then remained stable thereafter. It closed the week at 43,969.40, marginally up 0.4 per cent.

The price action on the daily chart shows that the Nifty Bank index is getting support near 43,500. The 21-Day Moving Average support is at 43,250. Below that, 43,000 is the next strong support. So, broadly 43,500-43,000 will be a very strong support zone for the index.

Graph Source: MetaStock

Graph Source: MetaStock

The short-term outlook is bullish. Nifty Bank index can rise to 45,000 and 45,500 in a couple of weeks. The medium-term outlook is also bullish to see 48,000 on the upside.

The above-mentioned bullish outlook will get negated only if the Nifty Bank index declines below 42,000. But that looks unlikely at the moment.

Supports to watch

18,200 – 18,000 on the Nifty

61,200 – 60,800 on the Sensex

43,500 – 43,250 on the Nifty Bank

Dow Jones (33,426.63)

It was a volatile week for the Dow Jones Industrial Average. The index fell in the first half of the week and then recovered all the loss in the second half. The uncertainty over the US debt ceiling talks kept the market under pressure. The Dow Jones closed the week at 33,426.63, down 0.38 per cent.

Graph Source: MetaStock

Graph Source: MetaStock

The index is getting good support around 33,000. However, the price action on the chart is not showing strength. Immediate resistance is at 33,800. The index has to breach this hurdle to become bullish. Such a break can take the Dow Jones up to 34,300-34,500 in the short term.

Failure to break above 33,800 can drag the index towards 33,000 again, In that case, it will remain vulnerable to break below 33,000. Such a break can take the Dow Jones further down to 32,700-32,500 in the short term.




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