Index Outlook: Some more downside

Last week, the Nifty 50, Sensex, and Nifty Bank index continued their downward trend, as predicted. The Sensex and Nifty declined by 0.54% and 0.88%, respectively, while the Nifty Bank index fell by 1.38%. The current charts indicate a weak market situation, suggesting that the benchmark indices may fall further from their present levels. However, key support levels are emerging, which could potentially halt the ongoing decline.

For the short-term, the Nifty and Sensex are expected to stay above the upcoming support, potentially reversing higher in the future. Foreign Portfolio Investors (FPIs) have stopped their three-week selling spree, with the equity segment witnessing a net inflow of around $402 million. To push the benchmark indices higher, FPIs need to increase their buying pace.

In the short term, the downtrend is intact, with resistance at 23,250-23,300 acting as a ceiling. A break above 23,300 is required to trigger a rise towards 23,600-23,700. However, this rise is less likely at the moment. Nifty is vulnerable to break below 23,000 and fall to 22,600-22,500. A bounce from this support zone could take the index back up to 23,000 and beyond.

In the medium-term, Nifty is moving towards the lower end of its 22,000-26,500 range. If Nifty fails to bounce from around 22,500, a further decline to 22,000 is possible. Currently, the outlook remains positive, with a positive bias for Nifty to bounce back between 22,500-22,000. This rise will maintain the sideways range and potentially push Nifty up to 25,000-26,000 in the medium term, leading to a long-term bullish outlook with a breakout above 26,500 and a rise to 28,000 and 30,000.

For the Nifty Bank index, a decisive break below 22,000 is necessary to invalidate the bullish view, which could lead to a fall to 21,700 and 21,200 initially.

The Nifty Bank index has short-term support at 55,175. If the index sustains above this level, a corrective rise to 56,500-57,000 is possible. However, the broader trend will remain downward. A reversal and a subsequent break below 55,175 could push the Nifty Bank index downwards to 54,000. A strong bounce from around 54,000 could again take the index to 56,000.

Conversely, a break below 54,000 could increase the risk of seeing 52,000 or even 51,000 on the downside. For now, expect a fall to 54,000 and monitor the price action closely to determine if a bounce is occurring or not.

Medium-term, 51,000 is a strong support level that can limit the downside if the index declines below 54,000. A fresh rally from around 51,000 could take the Nifty Bank index to 58,000-60,000 in the medium term. As long as the index stays above 51,000, the long-term bullish view remains intact. A break above 60,000 could clear the path for a rally to 65,000 and then 68,000-69,000 in the long term. A break below 51,000 would negate the bullish outlook, potentially dragging the Nifty Bank index down to 49,000 and even lower.