Index view: Does the Sensex, Nifty 50 have more room for the fall?

There is a sea of ​​red everywhere. The global stock market has been hit hard as last week saw a strong sell-off. Major indexes around the world fell in the range of 4-6%. The sale was triggered in the second half of the week after the results of the meeting of the US Federal Reserve. The Fed raised interest rates on its funds by 75 basis points (bps) well in line with market expectations. The central bank also hinted at the possibility of another round of raising interest rates by 75-point points.

Indian benchmarks found the week with a big difference down, but managed to stay afloat. But they fell sharply, breaking under their key support on Thursday and closed the week with a slight note. Sensex and Nifty 50 fell more than 5 percent. All sector indices closed in red. The BSE Metals and BSE Oil & Gas indices, which fell more than 9 percent, were the most defeated.

Foreign portfolio investors (FPIs) were net sellers of Indian stocks for the 10th consecutive week. They sold about $ 2.25 billion last week. Thus, the net outflow for June amounts to 4 billion dollars.

Exquisite 50 (15,293.5)

Nifty opened the week with a wide margin of less than 16,000. He managed to stay above the key support level of 15,645 in the first half of the week. But on Thursday it fell, breaking below that support and hitting a low of 15,183.4 on Friday. The index ended the week at 15,293.5 points, down 5.6%.

Graphics source: MetaStock

Graphics source: MetaStock

Upcoming week: The outlook is negative. Nifty has room for an additional drop to 14,700-14,600 this week. Immediate maintenance is 14,900. A break below it can drag him to 14,700-14,600.

However, the Friday candle shows indecision in the market in the short term. This leaves the chances for short-term help in the near future. So whether Nifty will fall to 14,700-14,600 from here or after a corrective rebound remains unclear.

Immediate resistance is 15,400. If Nifty manages to overcome this hurdle, a corrective rise to 15,750-15,770 is possible this week. However, a rise above 15,770 is unlikely. As such, we can expect Nifty to return below the region of 15,750-15,770 and initially fall back to 15,000. A break below 15,000 could drag it to 14,700-14,600 eventually.

What to watch

Support for 14,700-14,200 on NIfty

Sensex 49,000-48,000 support

Support for 31,835 Nifty Bank

Trading strategy: Traders can break now. Accumulate shorts when rising to 15,680. Keep the stop loss at 15,890. Trace the stop loss to 15,120 as soon as the index drops to 14,920. Move the stop loss further down to 14,820 when the index touches 14,740 down. Register a profit of 14,640.

Medium-term perspective: Important medium-term support for Nifty is forthcoming – 14,700-14,600 and then 14,400-14,200 is the next strong support. As such, the current decline could halt anywhere in the wide region of 14,700-14,200. A strong rebound from this support zone could lead Nifty to 15,500-15,700 initially. The price action will then need to be closely monitored to see if the index manages to rise above 15,700 or fall again.

In the long run, the region of 14,700-14,200 will be a good opportunity to start buying in small quantities. That is, investors can invest 30% of the planned investment capital.

Trading strategy: Position traders may continue to hold the short positions held at 17,171. Review the stop loss to 15,850 out of 16,100. Move the stop loss further down to 15,350 as soon as the index touches 15,150. Register a profit of 15,100.

Sensex (51,360.42)

After opening with a wide gap below 54,000, Sensex managed to stay above the important level of support of 52,400. But the sale on world markets on Thursday pulled the index sharply below that support. Sensex hit a low of 50,921.22 and closed at 51,360.42, down 5.4%.

Graphics source: MetaStock

Graphics source: MetaStock

Upcoming week: Perspective is the sword. Sensex may test the psychological market of 50,000 this week. A break below it could drag him to 49,500 and 48,900 – the next two important support for the week.

The immediate resistance is 51,650. If Sensex manages to break over it, a corrective rebound to 52,500-52,800 is possible before the aforementioned drop to 49,500-48,900 occurs.

Medium-term perspective: The strong medium-term support is in the broad region of 49,000-48,000. We expect the current decline to find a bottom everywhere in the region of 49,000-48,000 people. Recovery from this support area could take Sensex up to 51,500-52,500 in the coming weeks. The price action will then need to be closely monitored to see if Sensex can rise above 52,500 or turn down again, keeping the broader downtrend intact.

Nifty Bank (32,743.05)

The expected break below 34,000 and the fall to 33,000 occurred at the beginning of the week. After moving above 33,000 for a while, the Nifty Bank index fell, breaking below 33,000 to hit a low of 32,290.55 on Friday. He ended the week at 32,743.05, down 5 percent.

Graphics source: MetaStock

Graphics source: MetaStock

Perspective is the sword. The 33,000-33,500 region will be a good resistance this week. The increase may be limited to 33,500 in the event of an intermediate rebound. The Nifty Bank index could fall to 31,835 – a crucial medium-term support.

The price action will then need very close monitoring. The strong rebound from this support could bring the index back to 33,500-34,000. But a break below 31,835 increases the downward pressure. Such a break could then drag the Nifty Bank index down to 30,000-29,500.

Trading strategy: Given the risk / reward ratio, we prefer to stay out of the market this week.

Global signs

As expected, the Dow Jones Industrial Average (29,888.78) remained well below 32,000 last week. Also, the decline to 29,850 happened in line with our expectations. The index fell 4.8% last week.

Perspective is the sword. The immediate resistance will be 30,000. As the index trades below that resistance, the chances of the Dow falling to an additional 29,300 and even 28,950 are high in the short term.

The Dow will need to see a sustained rise above 30,000 to rest and rise back to 31,000 and higher.

In the long run, 28,000-27,750 is an important support area that can halt the current downturn if it exceeds 28,950.

Posted on

June 18, 2022

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