Following a strong post-Budget rally, the equity market began the shortened week on a flat note and the bellwether indices — the Sensex and Nifty 50 — ending the week with marginal gains.
After the sturdy up-move from their 52-week low they seemed to be taking a breather last week. After that banking stocks predominantly led. Foreign portfolio investors remain the net buyers in the equity market.
The Centre was in an over-drive, with all kinds of legislations passed that included the Real Estate Bill and changes to the oil exploration policy. Globally, the European Central Bank surprised investors announcing it will start buying corporate bonds to boost credit markets. After a two-day meeting on Tuesday, the Bank of Japan announced its interest-rate policy.
January’s IIP data is disappointing, but it continues to remain in the negative zone; contracting 1.5 per cent. This increases hope of a rate cut.
The index traded sideways in a narrow band between 24,451 and 24,820 and closed, advancing 71 points or 0.3% last week.
The week ahead shows a strong move by the Sensex above the key resistance of 24,000 and its 50-day moving average is encouraged. Last week it managed to stay above these levels and now it tests a resistance at 24,700.
Furthermore, the index has next crucial resistance at 25,000. This is a positive start to the week and it can help the index unfalteringly move past these hurdles. This can also have a psychological effect that leads to attracting fresh buyers.
Next resistance to watch out is at 25,500. For a while, the inability to exceed this can keep the index between 22,500 and 25,500. An emphatic move above 25,500 will take it up to 26,300 and 27,200. Support below 24,000 is at 23,000.
Nifty 50 (7,510.2)
The choppy Nifty moved in the 7,424-7,547 range last week, closing in on a positive note by inching-up 25 points. The index tests a key resistance at 7,500, appearing to be a consolidation after a sharp rally.
The week ahead: The index vacillated at around 7,500 and it sustained above its 50-day moving average. A positive start to the week can take the index higher to the immediate target of 7,600 and then 7,675.
The Nifty has immediate supports at 7,400 and 7,388 — 50-day moving average. The next supports are at 7,300 and 7,250. At these levels corrective declines are able to find support.
Traders that have a short-term outlook can continue to hold their long positions as long as the index hovers above 7,100. Only a strong close below 7,100 will alter the near-term downward trend. Subsequent supports at 7,000 and 6,870 will come into play.
Medium-term trend: The first week of March had a strong rally showing an upward gap with the index sustained above 7,400 in recent weeks – this is very positive. An definite rally beyond the direct resistance can take the index higher to the key medium-term resistance level of 7,750. Failure to breakthrough this level cause the index to be volatile. A strong break-out can help it climb even higher to 8,000 and 8,270 in the medium term. Key support from a medium-term perspective is at 7,000.
Bank Nifty (15,168.2)
The Bank Nifty found support at around 13,520 in late February. After recording a 52-week low at 13,407, the index bounced up sharply. This reversal is also triggered by a positive divergence in the daily relative strength index.
Though the index breached a key resistance at 14,500, it encountered a hurdle at around 15,500. The index has been moving sideways between 15,000 – 15,500 over the last week slipping 171 point or 1.1 percent closing the week at 15,168. The index has immediate supports at 15,000 and 14,765.
As long as the index trades above the second support, traders are able to their long positions; however, a decisive fall below 14,765 can lessen the near-term bullish momentum and drag the index down to 14,500 and then to 14,000 in the short term.
An upward recommencement and a breach of 15,500 will strengthen the bullish momentum and take the index up to 16,000 or 16,250.
The US indices, Dow and S&P 500 closed at a new high for 2017, while Asian markets and European markets ended on a mixed note. On Friday, the Dow advanced 1.3 percent to close at 17,213 as investors acknowledged ECB’s steps. The index has also moved above its 200-day moving average closing at a 2017 high.
It is now heading towards 18,000, but the inability to uphold the rally and a slump below 17,000 can drag it down to 16,400 or 16,100.
And as always, stay prepared. Here’s why you need to learn more about the Dow Jones S&P and what exactly is SPX reversal.