Index Outlook: Nifty 50, Sensex: Upmove Gains Momentum

Sensex, Nifty 50 and the Nifty Bank indices witnessed a strong rise last week. The benchmark indices rose breaking above their intermediate resistances and have closed on a strong note. All the three indices were up over 2 per cent last week.

All the sectoral indices also closed in green last week. The BSE Power and BSE Oil & Gas indices surged the most by 5.71 per cent and 5.79 per cent respectively.

Strong flows

The Indian equity segment witnessed a strong foreign money inflow last week. The foreign portfolio investors (FPIs) poured in about $2.2 billion into the Indian equities. This is a very positive signal, because after selling since September, the FPIs seem to be reversing their stance. As such, more inflows in the coming weeks will aid the Sensex and Nifty 50 scale new highs.

Nifty 50 (20,267.90)

The resistance at 19,875 was broken very comfortably last week. Nifty has surged well above the psychological 20,000-mark. The index has closed on a strong note at 20,267.90, up 2.39 per cent.

Short-term view: The outlook is bullish. Strong support will now be in the 20,200-20,000 region. Nifty can rise to 20,500-20,600 this week.

This 20,500-20,600 is an important short-term resistance. The chances of seeing a corrective fall from there cannot be ruled out. Failure to get a sustained rise past 20,600 can trigger a corrective fall to 20,400-20,300. As such, the price action around 20,600 will need a close watch.

In case the Nifty manages to breach 20,600 in the first attempt itself, then an extended rise to 20,800-20,900 is possible.

Medium-term view: Crucial resistance is in the broad 20,600-20,900 region. Whether Nifty is breaking above 20,900 or not will determine the next move. A strong break above 20,900 will be very bullish to see 21,500-21,800 over the medium term. But a turn-around from the 20,600-20,900 resistance zone can take the Nifty below 20,000 again to revisit 19,000 levels.

For now, 19,000 will be a very important support. The medium-term view will turn negative only if the Nifty declines below 19,000. In that case, a fall to 18,000 and lower can be seen.

Nifty Bank (44,814.20)

The Nifty Bank index has risen well breaking above the key resistance level of 44,500. The index touched a high of 44,951.10 on Friday before closing the week at 44,814.20, up 2.39 per cent.

Short-term view: The outlook is bullish. Strong support will now be in the broad 44,400-44,000 region. Nifty Bank index can breach 45,000 and rise to 46,000-46,200 in a week or two. Thereafter, a corrective fall to 45,000 is a possibility.

Medium-term view: The outlook is bullish. The region between 46,200 and 46,500 is an important resistance. A strong break above 46,500 will trigger a rise to 48,000-48,500 in the coming months.

From a long-term perspective, the recent bounce from around 42,000 is very important. That keeps the long-term uptrend intact. It keeps the potential high for the Nifty Bank index to target 50,000-50,500 over the long term, may be in the next few quarters.

Sensex (67,481.19)

Sensex rose breaking above the key resistance level of 66,500 last week. The index made a high of 67,564.33 on Friday before closing the week at 67,481.19. The index was up 2.29 per cent for the week.

Short-term view: The outlook is bullish. The broad region between 67,000 and 66,500 will be a very good support now. Sensex can rise to 68,300-68,500 this week. Thereafter, a corrective fall to 67,300-67,000 is a possibility.

The Sensex will now have to fall below 66,000 to turn negative. But that looks unlikely at the moment.

Medium-term view: The outlook is bullish. But the region around 68,500 is a very crucial resistance. A strong break above it will take the Sensex up to 70,000-70,100 over the medium term.

A turnaround from 68,500 and a fall below 68,000 could bring the index under pressure. That could keep the Sensex vulnerable to revisit 66,000-65,000 again. As such the price action around 68,500 will need a close watch in the coming weeks.

Dow Jones (36,245.50)

The Dow Jones Industrial Average continued its surge for the fifth consecutive week. The index rose breaching the key resistance levels of 35,500 and 35,750 to close the week on a strong note. The Dow Jones made a high of 36,264.85 on Friday before closing at 36,245.50, up 2.42 per cent. The index has surged over 11 per cent over the last five weeks.

Outlook: The uptrend is intact and strong. But key resistances is ahead at 36,500. Failure to surpass this hurdle can trigger a corrective fall to 35,500 this week. The region around 35,500 is a very strong support now. So, a break below it might not be easy.

As long as the Dow Jones remains above 35,500, the chances are high for it to breach 36,500. That will take the index up to 38,000 and higher in the coming weeks.

The Dow Jones will come under pressure only if it declines below 35,500. In that case, the danger of it falling below 35,000 and revisiting 34,000 levels will increase.