Index Outlook: Sensex, Nifty 50 prepare for another rally

India’s benchmark indices, the Sensex and Nifty 50, are up for the third week in a row. Sensex rose 1.65 percent and Nifty rose 1.86 percent last week. Both indices are up more than 5 percent in the past three weeks.

All sector indices closed green last week. The BSE Metal index outperformed others with a rise of 4.72 percent last week. The BSE Auto and BSE Bankex rose marginally by 0.62 and 0.58 percent respectively.

FPI flows

The Foreign Portfolio Investors (FPIs) picked up their buying pace last week. The FPIs bought $2.04 billion worth of Indian stocks last week. The rally in the Sensex and Nifty will get a boost from here if the FPIs continue to buy Indian stocks.

Handy 50 (18,117.15)

As expected, Nifty opened last Monday with a big gap of over 17,800 at 17,910.2. The pullback from the high of 18,178.75 found support around 17,900. The index has recovered well from its low of 17,899.90 and ended the week strongly at 18,117.15, up 1.86 percent.

The coming week: the close above 18,100 is positive. The outlook is bullish. Immediate support is 17,900. As long as the Nifty remains above this support, further gains to 18,300 and 18,430 this week are likely.

Chart source: MetaStock

Chart source: MetaStock

The near-term outlook will only turn negative if Nifty falls below 17,900. In that case, a decrease to 17,800 can initially be seen. If the sell-off intensifies, the Nifty could see a steeper drop to 17,550-17,500 in the near term.

Medium-term outlook: the bigger picture is optimistic. The 17,500 level is a strong support. Below that, the 21-week moving average at 17,076 and a trendline at 16,900 are the crucial medium-term support for the Nifty. There is now a good chance that the Nifty itself will remain above 17,500.

We maintain our broader bullish view of initially seeing 19,200-19,300 on the upside. From a much larger perspective, the Nifty now has the potential to target 20,500 at the upside in the coming months.

Sensex (60.950.36)

Sensex opened with a gap-up and initially broke above 61,000 last week. The index fell sharply from its high of 61,289.73 and failed to gain strong follow-up buyers. However, Sensex managed to bounce back from the low of 60,245.96 and close out the week at 60,950.36, up 1.65 percent.

Next week: The short-term outlook is bullish. Immediate support is 60,450. As long as the Sensex remains above this support, it is likely to see a sustained break above 61,000. Such a break can take the Sensex up to 62,500 in the short term.

Chart source: MetaStock

Chart source: MetaStock

The index will not come under pressure until it falls resolutely below 60,450. In that case, a test of 60,000 is initially possible. A further break below 60,000 will see a further drop to 59,300-59,000. But such a steeper drop below 60,000 now seems less likely.

Medium-term outlook: The medium-term outlook is optimistic. The 59,000 level is the first major support. Below that, the 21-week moving average near 57,350 is the next strong support. We see great opportunities for the Nifty to keep itself above 59,000 in case it falls below 60,000. We maintain our optimistic view of seeing 63,500-64,000 on the upside in the coming months.

Handy sofa (41,258.4)

The Nifty Bank index has been stuck in a sideways margin for the past few weeks. The trading range was 40,820 to 41,680. Within this range, the index closed at 41,258.40, up 0.65 percent.

The immediate prospects are not clear. The Nifty Bank index may continue to fluctuate in this sideways range for some time to come. From a larger perspective, however, the bias is bullish to see a breakout above 41,680 in the coming days.

Chart source: MetaStock

Chart source: MetaStock

There is strong support at 40,600. As long as the index remains above this support, there is a good chance it will break through 41,680. Such a break can initially reach 42,000 and 42,500. A further break above 42,500 could then push Nifty Bank to 43,000-43,300 in the coming weeks.

The Nifty Bank index will not come under pressure until it falls below 40,600. In that case, it could drop to 40,250 and 40,000.

Short-term goals

18,300-18,430 on the Nifty

62,000-62,500 on the Sensex

42,500-43,300 on the Nifty Bank

Global clues

As expected, the Dow Jones Industrial Average (32,403.22) witnessed a corrective decline last week. The fall came after the US Federal Reserve reiterated its aggressive stance at its meeting last week.

The Dow fell from around 33,000 to a low of 31,727 on Thursday. It closed at 32,403.22 for the week, down 1.4 percent.

Chart source: MetaStock

Chart source: MetaStock

While the Dow made a good recovery on Friday, the outlook is mixed, as the weekly chart shows. Key support is 31,440 – the 21-week moving average. Strong resistance is in the 33,300-33,400 region. We can expect the Dow to consolidate sideways between 31,400 and 33,400 for several weeks.

A breakout on either side of 31,400-33,400 will then determine the next move. The bias is bullish to see an upward breakout above 33,400. That break will then open doors for the Dow Jones to target 34,500 and 35,000 on the upside in the future.

The Dow will not come under pressure until it falls below 31,400. In that case, it could drop to 31,000.

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Published on November 5, 2022

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