Weekly Market Outlook: Sensex, Nifty likely to be range-bound

Mumbai: Off the five trading sessions this week, the markets fell on two days while rose on the other three. The irony was that the markets chose to fall on those two days in reaction to governments and the Reserve Bank of India (RBI) efforts to revive the economy. At the start of the week, the markets gave a thumbs-down to measures announced by the Finance minister over the weekend in the mega Rs. 20 lakh crore economic package.

Thereafter, the markets were more or less in a pull-back mode. However, any hopes of complete recovery were dismissed on Friday as financials tanked heavily post RBI’s off-cycle 40 bps rate cut. While the Central Bank tried to revive the economy by making lending more affordable for the corporates, the fact that loan moratorium was extended by another 3 months did not augur well for the lenders health.

The BSE benchmark index, the Sensex, swung in a wide range of 1,280-odd points, the index from an early week low of 29,968, tried to claw its way back, but eventually fell short. The Sensex ended the week with a modest loss of 1.4 per cent (425 points) at 30,673 and in the process, the BSE index has now shed 9 per cent in the current month.

Among the Sensex 30 stocks, banking stocks suffered brunt of the selling pressure. IndusInd Bank plunged over 19 per cent and Axis Bank slumped over 13 per cent. ICICI Bank, SBI and Bajaj Finance also tumbled over 9 per cent each. HDFC, Larsen & Toubro, HDFC Bank and Bajaj Auto dropped 4 – 7 per cent each.

On the positive front, ITC was the major gainer, up over 13 per cent on the back of value buying. Mahindra & Mahindra too soared nearly 12 per cent. Bharti Airtel, TCS, Infosys, Sun Pharma, Asian Paints and HCL Technologies were the other major gainers, up 4 – 7 per cent each.

Next week will also be the monthly closing for the markets. As per the monthly Fibonacci charts, the BSE Sensex came within striking distance of testing the support around monthly S3 and then bounced back. The monthly S3 is at 29,770 and the monthly S1 is at 31,280. Broadly speaking, this could be the range for next week, a break on either side could see an extension of the move in that particular direction.

As per the weekly Fibonacci charts, next week, the BSE Sensex may seek support around 30,185-30,030-29,880, and in case of an upside the BSE index may face resistance around 31,160-31,310-31,465.

The NSE Nifty ended lower for the third straight week, and was down a per cent at 9,039. As per the daily charts, the NSE index seems to be moving a in trading range of 8,800 – 9,230, with bias slightly in favour of the bulls. But, here is the paradox, the weekly charts indicates that the bears hold the upper hand. Tuesday’s trading session would be crucial in determining who takes the charge next week.

Among the key momentum oscillators on the weekly charts, the Slow Stochastic has given a negative crossover, which is a bearish sign. The Directional Index is also in favour of the bears, along with the ADX (Average Directional Index), which underlines that the bears are strong enough. The MACD (Moving Average Convergence Divergence) and RSI (Relative Strength Index) are some-what inconclusive, as while the former seems to be recovering from oversold levels, the latter is nearing oversold territory. 

Going ahead, it seems like the upside for the Nifty may be capped around the 20-DMA (Daily Moving Average) at 9,220, with next stiff resistance around 9,350. On the downside, the NSE index is likely to revisit it’s recent lows of 8,800-odd level.

Disclaimer: The article is for information purpose only and does advocate any buy or sell recommendation.

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