Index Outlook: Sensex, Nifty 50: Dip Before A Fresh Rise

Nifty 50, Sensex and the Nifty Bank indices opened the week on a strong note with a wide gap-up on Monday. However, they failed to sustain the momentum. The indices broadly remained stable in a narrow range for the rest of the week and managed to close higher for the second consecutive week.

On the charts, the picture is positive. However, an intermediate dip is a possibility before the indices march towards further highs.

Among the sectors, the BSE Bankex rose the most by 2.35 per cent last week. The BSE Auto index on the other hand fell by 2.35 per cent.

Back in action

The Foreign Portfolio Investors (FPIs) seem to have started buying Indian equities. The equity segment saw a whopping inflow of about $3.23 billion last week. That has reduced the net outflow for the month of March to just $401 million. This is a very positive sign for the Indian equity markets. Continued buying from the FPIs will aid the Sensex and Nifty 50 to scale new highs this year.

Video Credit: Businessline

Nifty 50 (23,519.35)

Nifty rose to a high of 23,869.60 by Tuesday last week and then fell back for the rest of the week. The index touched a low of 23,412.20 before closing the week at 23,519.35, up 0.72 per cent.

Short-term view: The resistance at 23,800 is holding for now. Support is at 23,400. A break below it can take the Nifty down to 23,200 or even 22,900 in the short term. But thereafter the index can rise back and breach the resistance at 23,800 decisively. Such a break can take the index up to 24,100 in the short term.

In case the Nifty breaks below 22,900, an extended fall to 22,700 and even lower is a possibility.

For now, we retain our bullish bias. As such we expect the Nifty to rise to 24,100 going forward. Whether this rise happens from here itself or after a short-lived dip to 23,200-22,900 needs to be seen.

Chart Source: TradingView

Medium-term view: The broader bias has turned positive. We can expect the Nifty to breach 23,800 eventually. Such a break will take the Nifty up to 25,000-26,000 initially in the coming months. It will also keep the doors open for the Nifty to target 28,000-28,500 by the end of the year or early next year.

However, if the resistance at 23,800 continues to cap the upside, there are chances to see sideways consolidation between 21,900 and 23,800 for a month or two. After that the rise to 25,000-26,000 and higher levels can happen.

Nifty Bank (51,564.85)

The intermediate resistance at 51,000 was broken last week as expected. The Nifty Bank index rose to a high of 52,063.95 and then fell back from there. However, the index is managing to hold above 51,000, which is a positive sign. The Nifty Bank index has closed the week at 51,564.85, up 1.92 per cent.

Short-term view: The outlook is positive. Support is in the 51,000-50,900 region. Nifty Bank index will come under pressure for a fall to 50,400-50,000 only if it breaks below 50,900. But that looks less likely.

We expect the Nifty Bank index to sustain above 50,900 and rise to 52,800-53,000 in the short term. The price action thereafter will need a close watch.

A sustained break above 53,000 will boost the bullish momentum. Such a break can take the index up to 53,500-54,000 thereafter.

In case the index turns down from around 53,000, it can fall back to 51,000 again.

Chart Source: TradingView

Medium-term view: The big picture remains positive and there is no change in the view. The region between 53,000 and 53,200 will be a crucial resistance to watch. A decisive close above 53,200 and then a subsequent rise above 54,000 will strengthen the bullish case. That in turn will take the Nifty Bank index up to 58,000-58,500 by the end of this year.

The region between 48,000 and 47,700 will continue to act as a strong support. The bullish view will come under threat only if the Nifty Bank index declines below 47,700. That looks unlikely at the moment.

Sensex (77,414.92)

Sensex broke the resistance at 78,400 but did not sustain. It touched a high of 78,741.69 and fell back from there. It has closed the week at 77,414.92, up 0.66 per cent.

Short-term view: Support is at 76,800. As long as the Sensex stays above this support, the bias will remain positive. As such, it can get a sustained break above 78,400 and rise to 79,200 in the short term.

In case the Sensex breaks below 76,800, it can fall to 76,000 and even lower in the coming days.

Chart Source: TradingView

Medium-term view: The broader outlook is bullish. We expect the Sensex to rise towards 80,000 in the coming weeks. A decisive break above 78,400 will clear the way for this rise. This rise to 80,000 will open the doors to target 90,000 over the long term.

The 73,000-72,500 region will continue to act as a strong support zone.

Dow Jones (41,583.91)

The Dow Jones Industrial Average surged to a high of 42,821.83 in the first half of the week. But it fell sharply thereafter giving back all the gains. The fall intensified on Friday. The Dow fell to a low of 41,530 before closing at 41,583.91, down 0.96 per cent.

Chart Source: TradingView

Outlook: Failure to sustain above 42,000 and the sharp fall on Friday can continue to keep the index under pressure. That keeps the broader bearish view intact. Strong resistance is in the 42,000-42,200 region. As long as the Dow stays below this support zone, the outlook is bearish. The Dow Jones can fall to 40,500-40,000-39,500 in the coming weeks.