Index Outlook: Sensex, Nifty 50 may rise, but be cautious

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Indian benchmark indices managed to remain above their support levels last week. Sensex, Nifty 50 and Nifty Bank indices have increased for the second consecutive week. Sensex and Nifty 50 were up more than one per cent each and Nifty Bank index closed 0.56 per cent higher. However, this progress is taking place well within the broader scope that we noted in this column last week. There is scope for further growth in this scope. However, we still remain cautious rather than overly optimistic. Therefore, we continue to urge traders to be very cautious and adopt and follow strict risk management strategies such as stop-loss.

Among sectors, BSE IT was the only index to end in the red last week. The index was down 0.5 percent. BSE Capital Goods Index performed better with a gain of 3.77 per cent. BSE Realty, BSE Power and BSE Consumer Durables indices were up 2.93 per cent, 2.54 per cent and 2.5 per cent respectively.

fpi flow

Foreign portfolio investors (FPIs) sold Indian equities for the second consecutive week. They pulled out $359 million from the equity segment last week. However, the month of March saw strong inflows of around $4.24 billion. Unless FPIs start buying equities very aggressively, it will be difficult for Sensex and Nifty to gain momentum. Therefore, as mentioned above, any move up in the benchmark indices from the current levels has to be considered carefully.

Nifty 50 (22,326.90)

Last week Nifty remained well above the support level of 21,900. The index rose 1.04 per cent to reach a high of 22,516 before closing the week at 22,326.

Short-term view: The break and close of the 21-day moving average, which is currently at 22,165, is a positive. However, the price action on the charts indicates key resistance around 22,530. If Nifty manages to hold above 22,165, the outlook for the week will be positive. Due to this, there will be a possibility of it breaking above 22,530. Such a break could take Nifty to 22,850 and 22,900 early this week. A break above 22,900 will see a rise to 23,200 in the coming weeks.

The 21,950 level is the next important support below 22,165. A break below 21,950 may pull Nifty down to 21,700 initially. Another break below 21,700 could take it to 21,500. Such a decline would turn the short-term outlook into a recession.

We want Nifty to remain above 21-day moving average and rise to 22,900 or 23,200 in the short term.

Chart source: Metastock

Medium Term View: The possibility of a rise to 23,200 and even 23,600-23,650 still remains. However, we reiterate that more caution is needed as Nifty has gone above 23,000. We expect the gains to be limited to 23,600-23,650. A reversal from 23,200 or around 23,600 could lead to a strong corrective pullback in the coming months.

The level of 21,500 is going to be an important support worth watching. A break below this may pull Nifty down to 20,800-20,500 initially. As reported last week, if the selling intensifies, the fall may even extend to 20,000-19,500.

However, from a long-term perspective, a drop to 20,000-19,500 would be a very good buying opportunity. So as soon as Nifty falls towards 20,000, we need to start approaching the market from buying side.

Nifty Bank (47,124.60)

Nifty Bank index rose to test resistance at 47,400, but there was no decisive break above it. The index touched a high of 47,440.45 and declined slightly from there. This week it has closed at 47,124.60 with a rise of 0.56 percent.

Short-term view: Immediate support is at 46,400. Below that, 46,000 is the next important support. If the index manages to sustain above 46,400, chances of it breaking 47,400 are high. Such a break could take the Nifty Bank index to 48,000.

Broadly speaking, 46,000 to 48,000 could be the trading range at the moment. A breakout on either side of this range will determine the next move. A break above 48,000 could take Nifty Bank index to 49,000. A break below 46,000 could take it down to 45,000.

Chart source: Metastock

Chart source: Metastock

Medium Term View: The range of 44,400-48,650 still remains intact. Therefore, the long-term bullish outlook will remain intact as long as the Nifty Bank Index remains above 44,000. A decisive rise above 49,000 would open the doors to a rise to 51,000-52,000 and even 53,000. After this, a corrective fall to 50,000 is possible.

However, before the above mentioned rise occurs, the possibility of seeing some volatile fluctuations between 44,000 and 49,000 cannot be ruled out.

The outlook will turn bearish only if the Nifty Bank index drops below 44,000. In that case, a fall to 43,000 and lower levels could be seen.

Sensex (73,651.35)

Sensex remained above 72,000 and has seen a good rise in the last week. It touched a high of 74,190.31 before closing the week at 73,651.35, up 1.13 per cent.

Short-term view: The outlook is positive. Supports are at 73,000 and 72,000. Intermediate resistance lies at 74,650. This can be tested if Sensex manages to sustain above 73,000. A break above 74,650 may take Sensex to 75,600-75,750 in the short term.

The view will turn negative only if a break below 72,000 is seen. In that case, a fall to 71,000 and 70,000 would occur.

Chart source: Metastock

Chart source: Metastock

Medium Term View: There is strong support in the 70,000-69,000 area. As long as the Sensex remains above this support zone, there will be chances of reaching the target of 78,000. A sustained break above 74,650 will open the doors for this rally.

The scenario will turn bearish only if there is a decisive break below 69,000. Due to this the Sensex will fall to 67,000-66,000.

resistance to view

Dow Jones (39,807.37)

A drop towards 39,200 and then a strong reversal last week happened as we expected. The Dow Jones Industrial Average fell to a low of 39,277.19 in the first half of the week. But after that, it reversed sharply and recovered all the losses. The index closed this week at 39.807.37, up 0.84 percent.

Chart source: Metastock

Chart source: Metastock

Outlook: The scene is bullish. Supports are at 39,500 and 39,200. The Dow Jones could rise to 40,200 – the next important resistance this week. There will be a need to keep a close eye on the price action thereafter.

A decisive break above 40,200 would be bullish, and upside could be seen at 40,600-40,800. But a reversal from around 40,200 could drag the Dow Jones down to 39,500.

We want the Dow Jones to cross 40,200 and move higher.

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