Index Outlook: Not much room to rise in Sensex, Nifty 50

Indian benchmark indices broadly remained stable last week barring the wild swing seen on Friday. Both the Sensex and Nifty 50 tumbled on Friday and were threatening for a weak close and more sell-off going forward. However, the indices recouped most of the day’s loss and closed the week marginally higher. Sensex and Nifty were up 0.34 per cent each.

Among the sectors, the BSE Power index outperformed others by rising 3 per cent last week. The BSE Consumer Durables index fell the most by 1.56 per cent.

The pace of selling from the Foreign Portfolio Investors (FPIs) slowed down last week. The FPIs sold $ 589 million in the equity segment. In June, they had pulled out $ 6.43 billion. The total outflow in the first half of 2022 is $ 28.4 billion.

Nifty 50 (15,752.05)

Nifty was stuck in between 15,700 and 15,900 until Thursday. It fell sharply to a low of 15,511.05, but managed to recover most of the day’s loss. Nifty closed the week at 15,752.05, up 0.34 per cent.

Chart Source: MetaStock

Chart Source: MetaStock

The week ahead: Three key resistances are there to watch this week. The first resistance is at 15,860 – the 21-Day Moving Average (DMA). The second one is at 15,900 and the third resistance is at 16,100. Chances are high for the Nifty to sustain below 15,900 itself. Even if it manages to break above 15,900, the upside will be capped at 16,100. A rally beyond 16,100 will need some strong trigger.

Supports are at 15,400 and 15,180. As long as the index trades below 15,900 / 16,100, the chances are high for the Nifty to test the above-mentioned supports in the coming week.

Trading strategy: The stop-loss at 15,810 on the shorts taken at 15,486 has been hit. Traders can take fresh short positions at the current levels. Accumulate shorts at 15,880 and 16,050. Keep the stop-loss at 16,180. Trail the stop-loss down to 15,680 as soon as the index falls to 15,450. Move the stop-loss further down to 15,380 as soon as the index touches 15,310 on the downside. Book profits at 15,250.

Medium-term outlook: The overall bearish view will remain intact as long as the Nifty trades below 16,100. A break below 15,180 can drag the index down to 14,900-14,800 initially and then to 14,500-14,400 eventually. We reiterate that 14,500-13,500 is a strong long-term support zone where the Nifty can find a bottom. Long-term investors can start buying, say 30 per cent of the intended amount in the 14,500-14,200 region and accumulate more on further fall to 13,500.

Trading strategy: The stop-loss at 15,850 on the shorts taken at 17,171 has been hit. We prefer to stay out of the market for a week or two.

Sensex (52,907.93)

Sensex opened with a wide gap-up above 53,000, but failed to get a strong follow-through rise. It tumbled to a low of 52,094.93 on Friday and has closed the week at 52,907.93, up 0.34 per cent.

Chart Source: MetaStock

Chart Source: MetaStock

The week ahead: Immediate resistance is at 53,250 – the 21-Day Moving Average (DMA). Further resistances are poised at 53,500 and 54,100. We expect Sensex to remain below 53,250-53,500. The upside will be capped at 54,100 even if a break above 53,500 is seen.

Immediate support is at 51,780 and then at 51,000-50,900. As long as the Sensex trades below 54,100, the chances are high for it to fall towards 51,780 and 51,000 this week.

Medium-term outlook: The medium-term trend is still down; 51,000-50,900 is a good intermediate support now. A break below 50,900 can take the Sensex down to 50,000 initially. It will also keep the doors open for our long-awaited medium-term target of 49,000-48,000. We reiterate that the fall to 49,000-48,000 will be a good opportunity for long-term investors.

Nifty Bank (33,539.45)

The Nifty Bank index opened the week with a wide gap-up open above 34,000, but failed to sustain. The index fell back from the high of 34,147 and then remained largely stable between 33,000 and 33,700 for most part of the week. It closed at 33,539.45, down 0.26 per cent.

Chart Source: MetaStock

Chart Source: MetaStock

The resistance at 34,000 is holding well. Above this, there is another strong resistance at 34,400. So, Nifty Bank index will have to break 34,400 to become bullish and rise to 35,000 and 36,000 levels again. But that looks less probable.

The 21-Day Moving Average (DMA) resistance is at 33,745. The chances are looking high for the index to remain below 34,000 itself. Immediate support is at 33,000. A break below it can drag the index down to 32,000.

The level of 32,000 is a very crucial long-term trend support. The price action around 32,000 will need a close watch to see if the index is managing to bounce back or not.

What to watch

Resistance at 15,900-16,100 on Nifty

Resistance at 53,500-54,100 on Sensex

Resistance at 34,000-34,400 on Nifty Bank

Trading strategy: Go short now and on a rise at 33,720. Keep the stop-loss at 34,200. Trail the stop-loss down to 33,400 as soon as the index falls to 32,850. Move the stop-loss further down to 32,700 as soon as the index touches 32,400 on the downside. Book profits at 32,200.

Global cues

The strong rally in the Dow Jones Industrial Average (31,097.26) witnessed in the week earlier fizzled out in the past week. The Dow surged to a high of 31,885 initially, but then fell back sharply to make a low of 30,431.87 on Thursday. The index has managed to bounce back from this low and close the week at 31,097.26, down 1.28 per cent for the week.

If the Dow manages to sustain this bounce, a further rise to 31,700-32,000 is possible. However, 32,000 is a strong resistance. A break above it is less likely. As such, the upside is likely to be capped at 32,000. A fresh fall thereafter will keep the broader downtrend intact and take the index down to 30,000 and 29,500 in the coming weeks.

Published on

July 02, 2022

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