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Nifty 50, Sensex and the Nifty Bank indices witnessed a good recovery last week. However, the rise stalled on Saturday as the Union Budget failed to impress the markets. The expected trigger has not come from the Budget for the markets to rise strongly. On the Budget Day, the benchmark indices had closed on a mixed note. However, for the week, the Sensex and Nifty were up over 1.5 per cent each. Nifty Bank index had risen over 2 per cent.
Among the sectors the BSE Realty sector surged 10.39 per cent last week. The BSE Auto and the BSE FMCG indices were up 4.93 per cent and 3.86 per cent respectively. The BSE IT index fell 2.93 per cent and was the underperformer last week.
Selling spree
The Foreign Portfolio Investors (FPIs) continued to sell Indian equities for the fourth consecutive week. They sold about $1.6 billion in the equity segment last week. The month of January has seen a net outflow of about $9 billion. The FPIs have to start buying in order to boost the momentum for Nifty 50 and Sensex.
Nifty 50 (23,482.15)
Nifty fell breaking below 23,000 to test 22,800 as expected. However, the index managed to reverse higher from the low of 22,786.90 recovering all the loss. Nifty touched a high of 23,632.45 before closing the week at 23,482.15 up 1.68 per cent.
Short-term view: The near-term view is positive. Support is in the 23,300-23,200 region. A rise to 23,800 is possible this week. If the Nifty manages to breach 23,800, the upside can extend up to 24,000.
On the other hand, failure to breach 23,800 can drag the Nifty down to 23,200 and 23,000 again. It will also keep the chances alive of revisiting 22,800 levels on the downside.
From a short-term perspective, Nifty has to get a sustained rise above 24,000 to strengthen the bullish case. Only then a rise to 24,300-24,400 will come into the picture.
For now, we expect a rise to 23,800 first and then will have to wait and watch the price action.
Chart Source: MetaStock
Medium-term view: The big picture remains the same. Strong support is at 22,500 and 22,400. This can still be tested as long as the Nifty stays below 24,400.
However, we reiterate that a fall beyond 22,400 is unlikely. A reversal from around 22,500-22,400 can take the Nifty up to 25,000-26,000 initially. This rise can happen immediately if the Nifty moves above 24,400 from here itself.
This rise will confirm the trend reversal and will indicate the resumption of the long-term uptrend. This leg of upmove will have the potential to target 28,000-28,500 on the upside this year.
In case the Nifty declines below 22,400, the downside can extend to 22,000 and not more than that. In such a scenario, the expected reversal can then happen from around 22,000.
So, we continue to reiterate that the fall to 22,500 is a very good buying opportunity from a long-term perspective.
Nifty Bank (49,506.95)
The Nifty Bank index broke below 48,000 initially but did not sustain. The index had recovered sharply from the low of 47,844.15. It touched a high of 50,009.50 before closing the week at 49,506.95, up 2.36 per cent.
Short-term view: The index is stuck inside the 48,000-50,000 range for the third consecutive week. Immediate support is at 49,000-48,900. The index has to sustain above this support and break 50,000 decisively to gain bullish momentum. If that happens, a rise to 51,000 and 52,000 is possible in the short term.
On the other hand, if the index continues to stay below 50,000 and breaks, 48,900, it can fall back to 48,000-47,800 again. In that case, the 48,000-50,000 range will remain intact for some more time. A break below 47,800 if seen can drag it down to 47,000.
Chart Source: MetaStock
Medium-term view: There is no major change in the view. Strong support is at 46,600. This can be tested if the Nifty Bank index breaks below 47,800. However, we expect the index to sustain above 46,600 and see a reversal from there towards 50,000-51,000 initially. An eventual break above 51,000 will then strengthen the bullish case for a rise to 54,000 and higher levels going forward.
The danger of a steeper fall to 44,000 will come into the picture only if the index declines below 46,600.
Sensex (77,505.96)
The index recovered on the back of the support band of 75,300-75,600 last week. It closed above the 20-day moving average (DMA), which is now at 76,800, and has surpassed a trendline resistance at 77,100. The weekly gain stood at 1.72 per cent.
Short-term view: Sensex has moved past a couple of important hurdles. The next resistance is at 78,800, where both 50- and 200-DMAs coincide. So, the likelihood for the extension of the rally to 78,800 is high.
Above 78,800, there is a barrier at 80,000. A breakout of 80,000 can reinforce the uptrend, possibly lifting the Sensex to 82,000. However, a fall off the 78,800-80,000-resistance band can drag the index back to 75,600 and 75,300.
Chart Source: MetaStock
Medium-term view: A rebound last week is a positive development from a medium-term perspective. However, for Sensex to mark a bullish trend reversal, it ought to surpass the barrier at 80,000. Such a breakout will open the door for an upswing to 90,000.
That said, there might be a minor correction from 82,000, possibly to 80,000, before the index moves to higher levels.
Key support levels below 75,300 are at 74,000 and 72,000. In case Sensex falls to these levels, it can be a good opportunity from a long-term perspective.
Dow Jones (44,544.66)
The Dow Jones Industrial Average was up by a marginal 0.3 per cent last week. Nevertheless, barring a rally on Monday, it was largely oscillating sideways between 44,550 and 45,000 for the rest of the week.
Chart Source: MetaStock
Outlook: Considering that the index has formed a bearish engulfing pattern on the daily chart, although the trend remains up, we might see a temporary correction.
Strong support can be seen between 44,000 and 43,800 which can be tested this week. A recovery off this support region can lift the Dow Jones to 45,250 in the short term. However, a breach of 43,800 can turn the outlook bearish, possibly dragging the index to 43,000.
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