It’s a sea of red all over. The global equity market was beaten down badly as they witnessed a strong sell-off last week. The major indices across the globe were down in the range of 4-6 per cent. The sell-off was triggered in the second half of the week after the US Federal Reserve meeting outcome. The Fed raised their fund rates by 75-basis points (bps) very much in line with market expectation. The central bank had also hinted for a possibility of another round of 75-bps rate hike.
The Indian benchmark indices opened the week with a wide gap-down but were managing to stay afloat. But they fell sharply breaking below their crucial supports on Thursday and closed the week on a weak note. Sensex and Nifty 50 tumbled over 5 per cent each. All the sectoral indices closed in red. The BSE Metals and the BSE Oil & Gas indices, down over 9 per cent each, were beaten down the most.
The Foreign Portfolio Investors (FPIs) were net sellers of Indian equities for the 10th consecutive week. They sold about $2.25 billion last week. With this, the net outflow for June stands at $4 billion.
Nifty 50 (15,293.5)
Nifty opened the week with a wide gap-down below 16,000. It managed to sustain above the key support level of 15,645 in the first half of the week. But on Thursday, it tumbled breaking below that support and made a low of 15,183.4 on Friday. The index has closed the week at 15,293.5, down 5.6 per cent.
Graph Source: MetaStock
The week ahead: The outlook is negative. Nifty has room for a further fall to 14,700-14,600 this week. Immediate support is at 14,900. A break below it can drag it to 14,700-14,600.
However, Friday’s candle indicates near-term indecisiveness in the market. This leaves the chances alive for a short-lived relief rally in the near term. So whether Nifty will fall to 14,700-14,600 from here itself or after a corrective bounce remains unclear.
Immediate resistance is at 15,400. If Nifty manages to breach this hurdle, a corrective rise to 15,750-15,770 is possible this week. However, a rise beyond 15,770 is unlikely. As such, we can expect the Nifty to reverse lower again from the 15,750-15,770 region and fall back towards 15,000 initially. A break below 15,000 can drag it to 14,700-14,600 eventually.
What to watch
Support at 14,700-14,200 on NIfty
Support at 49,000-48,000 on Sensex
Support at 31,835 on Nifty Bank
Trading strategy: Traders can go short now. Accumulate shorts on a rise at 15,680. Keep the stop-loss at 15,890. Trail the stop-loss down to 15,120 as soon as the index falls to 14,920. Move the stop-loss further down to 14,820 when the index touches 14,740 on the downside. Book profits at 14,640.
Medium-term outlook: Crucial medium-term supports are coming up for the Nifty — 14,700-14,600 and then the 14,400-14,200 is the next strong one. As such, the current fall can halt anywhere in the broad 14,700-14,200 region. A strong bounce from this support zone can take the Nifty up to 15,500-15,700 initially. Thereafter, the price action will need a close watch to see if the index is managing to rise past 15,700 or will fall-back again.
From a long-term perspective, the 14,700-14,200 region will be a good opportunity to start buying in small quantum. That is, investors can deploy 30 per cent of their intended investment capital.
Trading strategy: Positional traders can continue to hold the short positions taken at 17,171. Revise the stop-loss down to 15,850 from 16,100. Move the stop-loss further down to 15,350 as soon as the index touches 15,150. Book profits at 15,100.
After opening with a wide gap-down below 54,000, Sensex was managing to sustain above the crucial support level of 52,400. But Thursday’s sell-off across the global markets dragged the index sharply below that support. Sensex made a low of 50,921.22 and has closed at 51,360.42, down 5.4 per cent.
Graph Source: MetaStock
The week ahead: The outlook is bearish. Sensex can test the psychological 50,000 market this week. A break below it can drag it to 49,500 and 48,900 – the next two important supports for the week.
Immediate resistance is at 51,650. If the Sensex manages to break above it, a corrective bounce to 52,500-52,800 is possible first, before the above-mentioned fall to 49,500-48,900 happens.
Medium-term outlook: Strong medium-term support is in the broad 49,000-48,000 region. We expect the current fall to find a bottom anywhere in the 49,000-48,000 region. A bounce-back from this support zone can take the Sensex up to 51,500-52,500 in the coming weeks. Thereafter the price action will need a close watch to see if the Sensex can rise past 52,500 or will reverse lower again and keep the broader down trend intact.
Nifty Bank (32,743.05)
The expected break below 34,000 and the fall to 33,000 happened at the beginning of the week itself. After hovering above 33,000 for some time, the Nifty Bank index tumbled breaking below 33,000 to make a low of 32,290.55 on Friday. It has closed the week at 32,743.05, down 5 per cent.
Graph Source: MetaStock
The outlook is bearish. The 33,000-33,500 region will be a good resistance for this week. The upside can be capped at 33,500 in case of any intermediate bounce. The Nifty Bank index can fall to test 31,835 – a crucial medium-term support.
The price action thereafter will need a very close watch. A strong bounce from this support can take the index up to 33,500-34,000 again. But a break below 31,835 increase the downside pressure. Such a break can then drag the Nifty Bank index down to 30,000-29,500.
Trading strategy: Considering the risk-reward ratio, we prefer staying out of the market this week.
As expected, the Dow Jones Industrial Average (29,888.78) remained well below 32,000 last week. Also, the fall to 29,850 has happened in line with our expectation. The index tumbled 4.8 per cent last week.
The outlook is bearish. Immediate resistance will be at 30,000. As long as the index trades below this resistance, the chances are high for the Dow to fall further towards 29,300 and even 28,950 in the short term.
The Dow will have to see a sustained rise past 30,000 to get some breather and rise back towards 31,000 and higher levels.
From a long-term perspective, 28,000-27,750 is a crucial support zone which can halt the current fall if it extends beyond 28,950.
June 18, 2022