Outlook Index: Sensex & Nifty 50 consolidate sideways
The Indian benchmark indices have been stuck in a sideways range over the last two weeks. Nifty 50 is oscillating between 16,800 and 17,400. Sensex, on the other hand, is stuck between 56,000 and 58,000. Within this range, the indices have closed marginally lower last week. Nifty closing at 17,102.55 was down 0.4 per cent. Sensex had closed at 57,060.87, down 0.24 per cent for the week.
A breakout on either side of the current range will give a clear cue on the next leg of move for the indices. Our preference is for the indices to break these ranges on the downside and see a fresh fall, going forward.
The broader indices, small-cap and mid-cap have declined more than the benchmarks last week. The BSE Smallcap index was down 2.17 per cent and the BSE Midcap index fell 1.14 per cent. Among the sectors, the BSE PSU and BSE Oil & Gas were beaten down the most. Both indices fell over 3 per cent each last week.
The Foreign Portfolio Investors (FPIs) continue to sell the Indian equities. They sold $ 634 million in this segment last week. With this, the FPIs remain net sellers of Indian equities for the seventh consecutive month. The FPIs have pulled out about $ 16.8 billion so far this calendar year.
Nifty 50 (17,102.55)
Nifty opened the week with a wide gap-down and fell over a per cent on Monday. But thereafter it managed to recover and remain stable for the rest of the week. The index has closed at 17,102.55, down 0.4 per cent.
The week ahead: As mentioned above 16,800-17,400 has been the range of trade. The bias is bearish to break this range on the downside below 16,800 in the coming days. Such a break can drag the Nifty to 16,600 initially and then to 16,380 eventually in the short term.
The 21-Day Moving Average (DMA) at 17,425 is an important resistance above 17,400. A strong rise past 17,425 is necessarily needed to negate the above-mentioned fall to 16,600 and 16,380. Nifty can test 17,800 and 18,000 on the upside if it manages to breach 17,425 (21-DMA) decisively. But our preference is to see a break below 16,800 and not a rise above 17,425.
Trading strategy: The trailing stop-loss at 17,040 on the short positions recommended last week at 17,192 has got triggered.
Traders can go short again at current levels and accumulate shorts at 17,280. Keep the stop-loss at 17,440. Trail the stop-loss down 17,020 as soon as the index falls to 16,920. Move the stop-loss further down to 16,940 when the index touches 16,880. Book profits at 16,820. Traders with high-risk appetite can hold the shorts for the target of 16,640.
Medium-term outlook: The sideways move over the last two weeks is just a consolidation within the overall medium-term downtrend. Significant support is at 16,380. A break below it will trigger a sharp fall to 15,000. In case the fall extends, then we can see 14,000 on the downside. However, 15,000-14,000 is a strong support zone. Fall to this support region will be a good buying opportunity from a long-term perspective.
Nifty has to break the 18,100-18,200 resistance zone to turn the outlook bullish.
Trading strategy: Positional traders can hold the short positions taken last week at 17,171. Consider accumulating shorts at 17,350. Retain the stop-loss at 18,220. Trail the stop-loss down to 16,900 as soon as the index falls to 16,450. Move the stop-loss further down to 16,100 as soon as the index touches 15,600 on the downside. Book profits at 15,100.
Sensex is managing to hold above the key support level of 56,000. It has closed the week at 57,060.87, down 0.24 per cent.
The week ahead: The range of trade over the last couple of weeks have been 56,000-58,000. The chances are high for the Sensex to break this range below 56,000 and fall to 55,200 initially and then to 54,500 in the short term.
The 21-Day Moving Average (DMA) at 58,210 is the key resistance. Sensex has to surpass this hurdle in order to negate the fall to 55,200 and 54,500 mentioned above. In that case, 59,500-60,000 can be targeted on the upside.
Medium-term outlook: The view is bearish. The current sideways move is just a consolidation within the broader down trend.that had begun in the first week of April. Key short-term support is at 54,500. A break below it will accelerate the fall towards 52,000 and even 50,000 over the medium term. The region between 50,000 and 49,000 is a strong support zone. Investors can consider buying for the long term when the Sensex falls to 50,000 levels.
Nifty Bank (36,088.15)
The fall below 36,000 last week witnessed on Monday last week was short-lived. The index managed to recover well from the low of 35,511.4 and close the week marginally higher by 0.12 per cent at 36,088.15.
Key resistances are at 36,720 and 36,930. Above these there is a crucial trendline resistance at 37,420. The Nifty Bank index will have to surpass 37,420 to become bullish. In that case, it can test 38,000 and 39,000 levels again. But that looks less probable.
What to watch
Support at 16,800 on Nifty
Support at 56,000 Sensex
Supports at 35,300 on Nifty Bank
The bias is negative. The index can fall below 36,000 and test the key supports at 35,500 and 35,300. The chances are high to see a break below 35,300 and a fall to 34,600 and 34,100 in the next few weeks.
We reiterate that 34,000 is a very crucial level. A decisive break below it can drag the Nifty Bank index down to 33,000 and even lower over the medium term. As such the price action around 34,000 will need a very close watch.
Trading strategy: Last week we had suggested to go short at 36,044 and accumulate at 36,660. The average entry of this trade is now at 36,352. Retain the same strategy mentioned last week. Keep the stop-loss at 37,350. Trail the stop-loss down to 35,800 as soon as the index falls to 35,400. Move the stop-loss further down to 35,200 as soon as the index touches 34,800. Book profits at 34,600.
It was a volatile week for the Dow Jones Industrial Average (32,977.21). The index fell to a low of 33,109 on Wednesday and then recovered all the loss on Thursday. However, it failed to get a strong follow-through rise and tumbled on Friday giving back all the gains. The Dow has closed the week at 32,977.21, down 2.47 per cent for the week.
Crucial supports are at 32,750 and 32,260. A strong break below 32,260 will trigger a steeper fall to 31,000-30,500.
On the other hand, a bounce from either 32,750 or 32,260 can produce a relief rally to 34,000 again. The price action this week will need a close watch. The outcome of the US Federal Reserve meeting on Wednesday could be key in determining the direction of move for the Dow.
April 30, 2022
The Indian benchmark indices have been stuck in a sideways range over the last two weeks. Nifty 50 is oscillating between 16,800 and 17,400. Sensex, on the other hand, is stuck between 56,000 and 58,000. Within this range, the indices have closed marginally lower last week. Nifty closing at 17,102.55 was down 0.4 per cent.…