Index Outlook. Indices edge higher

Despite a muted start, the bellwether indices managed to close on a positive note last week. Continued support from foreign investors helped the indices stay afloat, above the key support levels of 9,500 and 31,000 in the Nifty and the Sensex respectively.

Although the GDP numbers disappointed, positive global cues helped the benchmark indices close at record highs. The mid- and small-cap indices rebounded, outperforming the benchmark. Bottom-fishing in the pharma stocks also helped the indices move higher.

Now that the earnings season has come to an end, investors will start tracking the monsoon, the RBI’s policy meeting and global cues in the coming week.

The Reserve Bank of India’s bi-monthly monetary policy announcement is scheduled on June 7 (Wednesday). The RBI maintained status quo in its last meeting. There is a possibility of staying on hold this time too. Global indices such as Dow, DAX and Nikkei heading northwards and closing on a strong note can keep the bullish momentum extended for a while.

The Nifty 50 advanced 0.6 per cent and the Sensex rose 0.8 per cent in the prior week to close at record highs.

After testing the key hurdle at 9,600, the Nifty index managed to surpass and close marginally above it last week. The index added 58 points or 0.6 per cent.

Short-term trend : With the recent break above the key resistance level of 9,500, the short-term uptrend has strengthened. The near-term outlook for the Nifty index will remain bullish as long as it trades above the key support level of 9,500. Both the daily and weekly indicators feature in the bullish zone, backing the uptrend. However, any corrective fall below the immediate support level of 9,600 can find base at 9,500 levels. The short-term uptrend will remain intact as long as the index trades above 9,400 levels. The index has a key support in the band between 9,345 and 9,400. Only a conclusive fall below 9,345 will alter the short-term uptrend and drag the index down to 9,250, 9,191 and 9,075 levels.

Traders with a short-term horizon can shift the stop-loss higher to 9,500 levels. An emphatic rally beyond 9,700 can take the index higher to 9,800 in the short term. We reiterate that inability to move beyond 9,700 levels can keep the index hovering sideways in the range of 9,500 and 9,700.

Medium-term trend: The index continues in a medium-term uptrend. As long as it trades above the psychological support of 9,000, there won’t be any major threat to this uptrend. Investors with a medium-term horizon can remain invested with a stop-loss at 8,950. Key medium-term supports are placed at 9,250 and 9,100. Resumption of the uptrend can take the index higher to 10,037 and 10,854 in the medium term with some pause at 9,700 and 9,800 levels.

Last week, the Sensex advanced 245 points or 0.8 per cent and managed to close above the immediate base level of 31,000. The gradual up-move in the index can take it higher to test resistance at 31,500 in the near term. A strong breach of this level will open the possibility of the index moving higher to 32,000 in the short to medium term.

That said, the emergence of a corrective decline can pull the index down to the immediate support level of 31,000 and 30,500. Next key support of the Sensex is at 30,000. Significant medium-term support to note is in the range between 29,000 and 29,500.

Following a strong rally in the week before, the Bank Nifty traded in a narrow range last week. It closed almost on a flat note, gaining marginally by 13.7 points. The index faces a key hurdle at 23,500.

The indicators in the daily chart are showing signs of weakness and the indicators in the weekly chart are featuring in the overbought zone, signalling caution.

A slump below the immediate support level of 23,000 can pull the index down to 22,500 and 22,300 in the near term. But to alter the short-term trend, the index needs to emphatically plunge below 22,500 levels.

An upward break of 23,500 can take the index upwards to 24,000 in the short term. With the RBI’s policy meeting ahead, the index could trade choppy in the coming week. Therefore, traders with short-term perspective should tread with caution.

The Dow advanced 126 points or 0.6 per cent last week, surpassing the key resistance level of 21,000 to close at 21,206.

The index can continue its uptrend and test next resistance at 21,400 and 21,500 in the short term. Key supports below 21,000 are placed at 20,800 and 20,600.

The Nikkei 225 index jumped 2.5 per cent, breaking above a key barrier at 20,000.

The near-term outlook is bullish. Next resistance is at 20,500. Supports are placed at 20,000 and 19,800.

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