30 May 2016

Sensex, Nifty’s good show to continue:: BL

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Following a lacklustre start, the domestic equity market saw an extraordinary run, spearhead by multiple events. First, firm global cues lifted sentiments. The US new home sales surged, signalling a pick-up in economic growth. This triggered short-covering ahead of the derivatives expiry. Also, the private weather forecaster Skymet on Wednesday upgraded its monsoon forecast, which added some buoyancy to markets.
Good show by blue-chip companies such as L&T, Tech Mahindra and BPCL in the March quarter, also cheered markets. The bellwether indices, the Nifty and the Sensex, moved well above their significant resistances. The indices also sported smart gains on strong buying interest; the domestic institutional investors and FPIs continue to be net buyers in equities.
The derivatives segment of June series started on a bullish note which also propelled markets. The Nifty as well as the Sensex gained 1 per cent on Friday.
The key sectoral indices, namely capital goods, banks, FMCG and Infra, ended the week in the green. For the week, the Nifty advanced 406.9 points or 5.3 per cent and the Sensex surged 1,351.7 points or 5.3 per cent. With the rally last week, the equity market is heading towards a firm close for the month of May, already gaining almost 4 per cent so far this month.
In the coming week, the macroeconomic data and the quarterly earnings could give some more direction for the indices. Auto sale numbers for May will also matter. Globally, Opec and European Central Bank meetings are scheduled for Thursday, which need to be watched.
Nifty 50 (8,156.6)
Following a slow start, the Nifty marked an intra-week low at 7,715 on Tuesday and then bounced back strongly, breaking through its key resistance level at 8000.
The week ahead: The index stayed above the key immediate support level of 7,700. Subsequent buying interest paved way for an upward break out of the immediate hurdle at 7,900 and the significant resistance level at 8,000 last week.
Interestingly, the index has conclusively breached its moving average compression (21, 50 and 200-day moving averages poised around 7,800) and has strengthened the uptrend. This could lay the foundation for a stable and healthy long-term uptrend.
The index has also surpassed its next resistance at 8,100. But it now faces an immediate barrier at 8,200. The indicators and oscillators in the daily chart feature in the bullish zone, backing the ongoing rally.
Further move beyond 8,200 can take the index to 8,300 in the coming week. However, a minor pause or corrective decline cannot be ruled out, after the index’s sharp up-move. Such declines can find support at 8,100 or 8,000. Traders with a short-term view can initiate long position in dips with a stop-loss at 8,000.
Medium-term trend: The index has been on a medium-term uptrend since late February. It witnessed an overwhelming rally last week, conclusively breaking the sideways consolidation range on the upside. The index is approaching the medium-term resistance at 8,175. A minor pause is likely at this level. The strong up-move can take the index higher to 8,300.
An emphatic breakthrough of this hurdle is required to alter the intermediate-term downtrend and take the index higher to the 8,500 and 8,600 band in the upcoming months. On the downside, the index has key medium-term support in the 7,550-7,600 zone. Immediate support is at 7,700. Investors with a medium-term perspective can consider buying with a stop-loss at 7,700.
Sensex (26,653.6)
Reinforcing the medium-term uptrend, the index breached a key resistance at 26,000 last week. It trades well above its 50 and 200-day moving averages.
The week ahead: The index can extend its rally to 27,000 and then to 27,500 in the short term. The indicators in the daily chart feature in the positive territory. The indicators in the weekly chart are on the brink of entering the positive territory from the negative zone. These will add strength once they feature in the positive zone. Key immediate supports to note are placed at 26,500, 26,300 and 26,000. The short-term uptrend will stay intact above 26,000. Subsequent supports below this level are at 25,800 and 25,500. Vital medium-term support is pegged at 24,500.
Bank Nifty (17,511.8)
Last week, the Bank Nifty outperformed the broader indices by climbing 6.3 per cent. After testing a key support at 16,500, the index bounced back strongly, breaking an important barrier at 17,000. With this up-move, the index has already reached the medium-term resistance level at 17,500 and is now testing it.
Continuation of the up-move can take it higher to 18,000 in the coming weeks. Traders with a short-term view can initiate long positions with a stop-loss at 17,250. Next supports are at 17,000, 16,700 and 16,500. As long as the index trades above 15,500, the medium-term uptrend will be in place. Key resistance above 18,000 is at 18,300.
Global cues
Taking support at 17,500, the Dow Jones Industrial Average rose 2 per cent to settle the week at 17,873.2. Strong rally above the 18,000 resistance can pave way for an up- move to 18,300 or a new high in the short term. Immediate supports are at 17,500, 17,200 and 17,000.


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