Nifty 50 and Sensex fell sharply last week breaking below a crucial long-term support. We had expected this support to hold and the indices to bounce back. That view has gone wrong. We would now prefer to stay out of the market, and see if the indices are getting a strong follow-through selling from here. Both the Nifty and Sensex are down for the third consecutive week now. They have declined about 6 per cent each over the last three weeks.
The Nifty Bank index, on the other hand, is also coming down but at a slower pace. The index has declined only 3.6 per cent over the last three weeks.
All the sectoral indices ended in red last week. The BSE IT index was beaten down the most. It was down 7.76 per cent.
More selling
The Foreign Portfolio Investors (FPIs) continue their selling spree. They sold about $1.25 billion in the equity segment last week. February has seen a net outflow of about $3.98 billion. There has been a whopping $13 billion outflow in the first two months of this year. Unless the FPIs start to buy Indian equities, the fall in unlikely to halt.
Video Credit: Businessline
Nifty 50 (22,124.70)
After staying stable above 22,500 almost all through the week, Nifty broke this support and fell almost 2 per cent on Friday. It touched a low of 22,104.85 and closed the week at 22,124.70, down 2.94 per cent.
Short-term view: The break and close below 22,350 keep the outlook weak. Next support for the Nifty is at 21,700 which can be tested this week. If the index manages to bounce back from this support a recovery to 22,000 can be seen first. A break above 22,000 can then give some relief and take the Nifty up to 22,600-22,650.
On the other hand, if Nifty declines below 21,700, the fall can extend to 21,500 or even 21,100.
Medium-term view: The view of seeing a bounce from 22,350 seems to have gone wrong. The region between 21,700 and 21,500 is the next crucial support. Nifty has to hold above this support zone to keep the chances still alive for a fresh rally. A break below 21,500 and then a fall below 21,100 will increase the danger of seeing steeper fall to 19,600.
Such a fall will negate our view of seeing a rise to 28,000-28,500 this year.
Nifty Bank (48,344.70)
Nifty Bank fell last week, but at a slower pace. The index made a low of 48,078.70 and closed the week at 48,344.70, down 1.3 per cent. It is not looking as weak as the Nifty 50
Short-term view: Support for the Nifty Bank index is at 47,800 and 47,600. This can be tested this week. A bounce from 47,800 or 47,600 can take the index up to 49,500-50,000 in the short term.
But, if the Nifty Bank index declines below 47,600, it can come under more selling pressure. In that case, a fall to 47,000 or 46,600 can be seen in the short term.
Medium-term view: As we have been mentioning for some time, 46,600 is a strong support which can limit the downside. A strong bounce from around 46,600 can take the Nifty Bank index up to 49,000-50,000 initially. An eventual break above 50,000 will then clear the way for a rally to 53,000-54,000 and higher going forward.
The index will come under more pressure if it declines below 46,600. If that happens, a fall to 44,500-44,000 can be seen.
Sensex (73,198.10)
Sensex fell sharply below the psychological 75,000 mark last week. The index tumbled to a low 73,141.27 before closing the week at 73,198.10, down 2.81 per cent.
Short-term view: An immediate support is at 72,900. A bounce from this support can take the Sensex up to 74,500-75,000 again. That will give some relief for the index.
On the other hand, if Sensex declines below 72,900, we may see a fall to 71,800, and even lower in the coming weeks.
From a short-term perspective, 77,000-77,500 is a strong resistance zone. Sensex has to rise above 77,500 in order to bring back the bullish sentiment.
Medium-term view: The region between 71,000 and 70,700 is the next crucial support for the Sensex. As long as the index stays below 75,000 a fall to 71,000-70,700 cannot be ruled out in the coming weeks.
We can expect the fall to halt in the 71,000-70,700 region. A strong bounce from there can take the Sensex up to 75,000-76,000 again in the coming months. Such a rise will still keep alive our broader bullish view of seeing a rise back to 80,000 and higher levels this year.
In case the index declines below 70,700, then it can come under more selling pressure. In such a scenario, there is a danger of seeing a fall to 66,000 going forward. That in turn will completely negate our view of seeing 90,000 on the upside this year.
Dow Jones (43,840.92)
The Dow Jones Industrial Average remained lower below 44,000 all through the week. Broadly, the index was stuck between 43,000 and 44,000. Within this range, the index witnessed a strong surge from around the lower end towards the upper end. The Dow Jones has closed the week at 43,840.92, up 0.95 per cent.
Outlook: The immediate outlook is unclear. The 43,000-44,000 range can continue to remain intact. As long as the index stays below 44,000, the bias will remain negative to break below 43,000. Such a break can drag the Dow Jones down to 42,000-41,800 in the coming weeks.
There are series of resistances in the 44,000-44,500 region. So, ideally the Dow Jones will have to breach 44,500 decisively in order to turn the outlook bullish. But such rise looks less likely. So, the preference will be to see the Dow Jones remain below 44,000-44,500 and fall to 42,000-41,800 in the coming weeks.
Crucial supports