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Index Outlook: Will indices dance to the tune of monthly derivatives expiry? – BusinessLine

Last week, benchmark indices Sensex and Nifty 50 were volatile, taking cues from the global markets, and ended marginally in negative territory.

The global markets are likely to remain unstable this week , ahead of the August month derivatives expiry.

Also, profit booking is likely to emerge at higher levels or on a fall below the vital base. Therefore, investors should tread with caution in the ensuing week.

Nifty 50 (16,450.5)

Last week, the Nifty 50 gradually moved up and recorded a new high at 16,701.8 before witnessing 0.7 per cent fall on Friday. The index ended the week on a negative note, declining 78 points or 0.48 per cent.

The week ahead: The short-term trend remains positive as long as the index trades above the key base in the band between 15,900 and 16,000. A corrective decline from current levels can find support at the immediate base level of 16,240. A further fall can extend the down-move to the aforementioned support band. The index continues to trade well above the 21- and 50-day moving averages. The daily relative strength index has corrected from the overbought territory and features in the bullish zone. The weekly RSI also hovers in the bullish zone. Besides, the daily as well as weekly price rate of change indicators hover in the positive terrain, signifying buying interest.

Key immediate resistance is at 16,700. If the index manages to stay above the immediate support in the band between 16,240 and 16,300, it can retest resistance at 16,700. A strong rally above 16,700 can pave the way for an up-move to 16,800 and then to 17,000 in the ensuing weeks. That said, if the index slumps below 16,240, that can bring selling pressure and drag the index lower to 16,000.

We restate that a strong plunge below the vital support in the band between 15,900 and 16,000 can change the short-term uptrend and pull the index down to the next support in the 15,500-15,600 zone. Significant supports thereafter are at 15,300 and 15,000 levels.

Medium-term outlook: There is no major change in the medium term uptrend that commenced from the April low at 14,151. This uptrend will stay in place as long as the index trades above the significant medium-term support at 15,000. An emphatic decline below this base level will start weakening the uptrend and pull the index down to 14,800 and then to the following supports at 14,500 and 14,200. Subsequent supports are at 14,000 and in the 13,500-13,600 band.

In case of a corrective decline below the base level of 16,000, the medium-term supports placed at 15,500 and 15,000 can act as a key base level. The index now tests key resistance at 16,700. A decisive breakthrough of this level can pave the way for an up-move to 17,000 over the medium term.

Sensex (55,329.3)

The Sensex was volatile in the past week and has declined 107 points or 0.19 per cent. An immediate support at 55,000 is cushioning the bellwether index. As long as the index trades above 55,000, the near-term bullish momentum will stay intact. A rally above 55,500 can take the index higher to 55,800 and then to 56,118 levels in the coming weeks.

On the downside, if the index declines below the immediate support level of 55,000, it can get pulled to next key support level of 54,500 and then to 54,000 over the short term. We reiterate that a slump below the key support level of 54,000 can extend the corrective decline to 53,500 levels. Supports thereafter are placed at 53,000 and 52,770. The medium-term uptrend that began from the April low at around 47,204 will stay in place as long as the index hovers above the psychological level of 50,000. Crucial supports below 50,000 are pegged at 49,500 and 48,700 in the medium term. Investors with a long-term perspective can stay invested with a long-term stop-loss at 46,000.

Nifty Bank (35,033.85)

Last week, Bank Nifty had failed to decisively move beyond the key resistance in the band between 36,000 and 36,200. On the back of selling pressure, the index tumbled 1,135 points or 3.14 per cent in the week ago. On Friday, it declined 1.46 per cent and breached the 21- and 50-day moving averages. However, the index tests support at 35,000 and next vital support at 34,800. An upward reversal from these supports can take it higher to 35,430. A strong breakthrough of the resistance at 35,350 is needed to bring back bullish momentum and take the index higher to 36,000 levels.

An upward break above 36,200 can take it northwards to 36,500 and then to 37,000 levels over the short term. Resistances thereafter are placed at 37,200 and 37,700 levels.

But a conclusive fall below the key base level of 34,800 can pull the index down to 34,500. A further slump below this level can pull it to 34,000 levels. An emphatic fall below 34,000 will change medium-term uptrend that started from the April low of 30,405 levels. Subsequent supports are at 33,000 and 32,000.