Last week, both Nifty 50 and Sensex experienced a sharp decline, breaking below a crucial long-term support level. Previously, the expectation was for this support to hold and for the indices to bounce back, but that view has now been proven wrong. As a result, it would be prudent to stay out of the market for the time being and observe if the indices continue to see strong follow-through selling. Over the past three weeks, both the Nifty and Sensex have each declined by approximately 6 percent.
Meanwhile, the Nifty Bank index has also been trending downwards, albeit at a slower pace, with a 3.6 percent decrease over the same three-week period. Last week, all sectoral indices closed in the red, with the BSE IT index recording the largest decline at 7.76 percent.
Foreign Portfolio Investors (FPIs) have continued their selling activities, with a net outflow of about $1.25 billion in the equity segment last week. February has seen a total outflow of approximately $3.98 billion, bringing the year-to-date total to a significant $13 billion. Unless there is a reversal in FPI sentiment towards Indian equities, the downward trend is likely to persist.
Looking at the individual indices, the Nifty 50 closed the week at 22,124.70, down 2.94 percent. A break and close below 22,350 has weakened the short-term outlook, with the next support level at 21,700. If the index bounces back from this support, a recovery to 22,000 could be seen, followed by a potential move to 22,600-22,650. On the flip side, a decline below 21,700 could lead to further downside towards 21,500 or even 21,100.
The Nifty Bank index closed at 48,344.70, down 1.3 percent for the week. In the short term, support levels are seen at 47,800 and 47,600, with a bounce from these levels potentially taking the index higher to 49,500-50,000. However, a breach below 47,600 could result in additional selling pressure, bringing the index down to 47,000 or 46,600.
As for the Sensex, it closed the week at 73,198.10, a 2.81 percent decline. Immediate support is at 72,900, with a bounce from this level possibly pushing the index back up to 74,500-75,000. However, a drop below 72,900 could lead to further downside towards 71,800 and beyond. Resistance levels are seen at 77,000-77,500, with a breakout above this range necessary to shift sentiment back to bullish.
In the medium term, the Sensex faces a crucial support zone between 71,000 and 70,700. Maintaining above this level could pave the way for a rally towards 75,000-76,000. Conversely, a breach below 70,700 could result in increased selling pressure, potentially leading to a decline to 66,000.
For the Dow Jones Industrial Average, the index closed the week at 43,840.92, up 0.95 percent. It remains range-bound between 43,000 and 44,000, with a negative bias persisting below 44,000. A break below 43,000 could trigger a move towards 42,000-41,800 in the near term. On the upside, resistance levels are seen at 44,000-44,500, with a decisive breakout needed to turn the outlook bullish.
Overall, the outlook for the major indices remains cautious, with key support and resistance levels guiding short-term and medium-term expectations. It is important to monitor market developments closely and adjust strategies accordingly to navigate the current volatile environment effectively.
