D-Street ahead: Nifty and Sensex outlook for the coming week

The Bombay Stock Exchange (BSE) building is seen beside a police van in Mumbai, India, on August 24, 2015. On this day, India's benchmark BSE index dropped over 5%, marking its lowest point in a year, amid a global market fallout triggered by a Chinese equity rout.

The Nifty 50 is currently trading near a three-week low, with all major sectors closing in the negative. The index has shown signs of weakness, trading below both the 21-day and 55-day moving averages. The MACD (Moving Average Convergence Divergence) indicator has also turned bearish, with the MACD line crossing below the signal line. As a result, Nifty is facing resistance at 23,350, which may act as a significant hurdle unless the index sustains above this level. For now, a sell-on-rise strategy is advised. Key support is seen in the 22,800-22,750 range. A break below these levels could drive the index towards 22,500, with further downside potential targeting the crucial 22,000 support, aligned with the 100-week EMA.

Bank Nifty, which closed in the red this week, fell 2.11%, forming a negative candlestick pattern on the weekly chart. Trading below both the 21-day and 55-day EMAs points to market weakness. Resistance lies at 49,650, with a breakout above this level potentially pushing the index towards 50,200. On the downside, support is pegged at 48,700, this week’s low, and a breach below this could fuel further declines toward 48,000. Given the broader bearish tone, a sell-on-rise approach is recommended until a decisive breakout materializes. Traders should closely monitor key support and resistance levels to gauge market direction.

Technically, repeated retests of the January low at 22,800 have diminished its significance, raising the likelihood of further declines. The next key support is seen between 22,100 and 22,500. In the event of a rebound, resistance will first be encountered at the 20-day exponential moving average (DEMA) of 23,350, followed by further resistance at 23,600.

Despite the prevailing negative sentiment, the relative strength of sectors like banking and IT has helped cushion the broader market decline. Traders should keep an eye on these sectors for potential shifts in market direction. While the market is showing signs of oversold conditions, a cautious outlook remains, and it’s advised to refrain from bottom-fishing or averaging down on underperforming positions at this time.