Nifty 50, Sensex and Nifty Bank indices are showing diverging signals after the last week’s fall. Nifty and Sensex were down about a per cent. The fall last week has taken the Nifty well below the key support level of 24,000. This has negated our view of seeing a rise to 24,500-24,700 that we have been expecting. Nifty looks vulnerable to fall more from here.
Sensex on the other hand is poised just above a crucial support. The price action this week is going to be crucial. Barring the fall on Wednesday, Nifty Bank index broadly remained inside the 57,000-58,000 range. We will have to wait for a breakout on either side of this range to get clarity on the next move.
FPIs sell
The Foreign Portfolio Investors (FPIs) snapped their six-week buying streak last week. The equity segment saw a net outflow of about $917 million. With this, the month of September had begun on a negative note. Need to watch closely the FPI action. If they intensify their selling, then Sensex and Nifty can remain under pressure.
Nifty 50 (23,897.70)
Short-term view: The fall and close below 24,000 has turned the short-term picture negative. Strong resistance will now be in the 24,000-24,200 region. Nifty can fall to 23,600 from here. The price action thereafter is going to be crucial.
A bounce from around 23,600 can trigger a relief rise to 24,000. But a break below 23,600 will increase the selling pressure and drag the index down to 23,400-23,300.
A sustained rise above 24,200 is needed to bring back the chances of seeing 24,500-24,700 on the upside.
Medium-term view: The fall last week has reduced the chances of the rise within the 22,000-26,500 range that we have been expecting. A break below 23,600 will completely negate that for now. If that happens, then there is a danger of seeing 23,000-22,500 on the downside in the coming weeks.
However, there is no change in our long-term bullish view. We expect the Nifty to breach 26,500 eventually and rise to 28,000 and 30,000 in the long term. The fall last week is just delaying the expected bullish breakout above 26,500.
Our long-term bullish view will go wrong only if the Nifty breaks below 22,000.
Nifty Bank (57,369.65)
Short-term view: Barring the fall to 56,823 on Wednesday, the Nifty Bank index remained well within the 57,000-58,250 range. The immediate outlook is unclear. The index can continue to oscillate between this range. A breakout on either side of 57,000-58,250 will then determine the next leg of move.
A break below 57,000 can drag the index down to 56,500 and 56,000. On the other hand, a break above 58,250 will be bullish to see 59,000 and 60,000 on the upside.
Our preference is to see a bullish breakout above 58,250. We will have to wait and see.
Medium-term view: The broader picture remains positive. The region around 60,000 is a key resistance. A break above it can take the Nifty Bank index higher to 65,000 in the medium term. The level of 55,000 is a crucial support. The medium-term outlook will turn negative only if the index declines below 55,000. In that case, a fall to 52,000-51,000 can be seen.
The index also has potential to target 68,000-69,000 in the long-term. This bullish view will go wrong only if the index breaks below 50,000.
Sensex (76,515.43)
Short-term view: A crucial support is in the 76,150-76,000 region which has held well last week. Sensex has to sustain above 76,000 and get a strong rise above 77,400 in order to turn the bias positive. Only then the chances of the rise to 79,000-80,000 will come back into the picture again.
A break below 76,000 will turn the outlook negative. It can then drag the index down to 75,500 first and then to 74,000 as well, eventually. The price action this week is going to be very important.
Medium-term view: As long as the index sustains above 76,000, the chances of rising within the broad 71,000-86,000 will remain alive. A sustained fall below 76,000 will only negate that rise and increase the danger of seeing 73,000 and lower levels in the medium term.
However, there is no change in our long-term bullish view as of now. We retain our view of seeing a bullish breakout above 86,000 and a rise to 90,000 and 94,000 in the long term.
Sensex has to decline below 71,000 to prove our long-term bullish view wrong.
Nifty Midcap 150 (23,168.35)
Contrary to our expectation, the Nifty Midcap 150 index broke the support at 23,300 and fell to a low of 22,935 last week. Important resistance is in the 23,350-23,400 region. A strong rise above 23,400 is needed to turn the short-term picture positive. Only then the rise to 23,750 mentioned last week can happen.
Failure to get a strong follow-through rise from here and a subsequent fall below 23,100 will keep the short-term picture negative. In that case, a fall to 22,800-22,750 or even 22,700 can be seen.
However, the broader bullish view is still intact. A fall beyond 22,700 is less likely. So, we continue to retain our bullish view of seeing 26,000-26,500 in the medium-term and 28,000 in the long term. A rise above 23,750 will clear the way for this rally.
Nifty Smallcap 250 (18,481.40)
The index has risen back very well from the low of 18,153.60 last week recovering almost all the loss. That indicates the presence of strong buyers at lower levels. If this bounce sustains, 18,600 can be seen in the near term. A break above it can take the index further higher to 18,800.
The overall bullish view remains intact. We expect the Nifty Smallcap 250 index to target 22,500-23,000 in the medium term and 24,000-24,500 in the long term.
The level of 18,000 is an important support for now. The short-term outlook will turn negative only if the index breaks below this support. That in turn can drag the index down to 17,500 or even lower. However, such a fall will not disrupt the long-term bullish picture. It will only delay the expected rally.
