Market indicates.

 The indices are currently poised above their crucial support. The outcome of the Union Budget on Tuesday will be key in determining whether the Sensex and Nifty can hold above their supports and move up or break lower and extend the fall.

Among the sectors, the BSE Consumer Durables index fell the most, by 6.83 per cent. The BSE IT and BSE Realty indices were down over 5 per cent each. The BSE PSU and BSE Bankex were the only two indices to close the week in green. They were up 1.91 and 0.74 per cent respectively.

Foreign Portfolio Investors (FPIs) had sold heavily in the past week. The Indian equity segment saw an outflow of $2.6 billion last week. As it stands, the FPIs have sold about $3.84 billion in January, surpassing the $2.52 billion outflow seen in December. Further selling from the FPIs will restrict the upside and keep the Sensex and Nifty under pressure for further fall.

Nifty 50 (17,101.95)

Nifty fell sharply to a low of 16,836.8 by Tuesday and then attempted to recover towards the end of the week. But the bounce-back move seems to lack strength. Nifty rose back to 17,373.5 on Friday and had come off from there to close the week at 17,101.95, down 2.92 per cent.

The week ahead: Immediate support for Nifty is at 17,000. If it manages to sustain above this support, a corrective bounce to 17,500-17,750 is possible. Cluster of moving average resistances are poised in the 17,500-17,750 zone. The 21-, 55- and 100-Day Moving Averages (DMA) are present in this zone.

As it will be difficult for Nifty to rise past 17,750, the index will need a strong trigger from the Budget to break above 17,750. Such a break will pave the way for a rise to test the next resistances at 18,000-18,200. The broader bias is bearish. As such we expect Nifty to hold below 17,750 and break below 17,000 and fall to the next support levels of 16,600-16,500 initially and then eventually to 16,000 in the short term.

Medium-term outlook: The medium-term outlook will remain bearish as long as the Nifty remains below the broad 18,000-18,500 resistance zone. A strong close below 17,000 this week will indicate a double-top pattern on the chart. It will also strengthen the bearish case for breaking below 16,000 and extending the fall to 15,000-14,500 in the coming months. The outcome of the Budget will be crucial.

Trading strategy: High volatility is expected in the Budget week. As such only traders only with high-risk appetite can consider taking shorts at 17,450 and accumulate at 17,650. The average entry will be at 17,550. Keep a stop-loss at 17,870. Trail the stop-loss down to 17,320 as soon as the index falls to 17,050. Move the stop-loss further down to 17,060 as soon as the index touches 16,850. Book profits at 16,700.

Sensex (57,200.23)

Sensex tumbled below the support level of 58,600 at the beginning of the week itself. It made a low of 56,409.63 on Tuesday. The bounce-back from this low seems to be facing resistance at 58,000. Sensex made a high of 58,084.33 on Friday and fell back to close the week at 57,200-23, down 3.11 per cent.

The week ahead: Important supports for the week are at 56,500 and 56,000. Resistances are at 58,000 and 59,000. If Sensex manages to hold above 56,000 and breaks above 59,000 decisively, it can rise to 61,000-61,200. The trigger for this rise will have to come from the Budget. Else the chances are high for the Sensex to remain below 59,000. As such we can expect the Sensex to break below 56,000 and fall to the next support at 55,000 in the short term.

Medium-term outlook: The medium-term outlook is bearish. Strong resistance is in the 61,000-62,000 region. Sensex will have to rise past 62,000 to turn the outlook bullish. From a medium-term perspective, the bearish view remains intact to see a break below 55,000. Such a break can drag it to the next support levels of 53,000 and 52,000 in the coming months.

Nifty Bank (37,689.40)

The Nifty Bank index tumbled over 3 per cent in the first half of the week to make a low of 36,375.35. However, the index bounced back sharply from this low, recovering all the loss, and closed the week marginally high by 0.79 per cent at 37,689.40.

Strong resistances are at 38,450 and 38,520. Much higher resistances are at 38,850 and 39,000. The chances are high for the index to remain below the immediate resistance at 38,520 itself. Nifty Bank index will have to rise past 39,000 to become bullish.

For now, we retain our bearish view of seeing a fall to 36,000-35,500 in the coming weeks. A strong break below 35,500 will increase the downside pressure and will drag the index to 34,000 over the medium term.

Trading strategy: Traders who have entered shorts at 37,950 and 38,120 can hold it. The average entry level of this position is at 38,035. The strategy remains the same. Retain the stop-loss at 39,150. Trail the stop-loss down to 37,920 as soon as the index falls to 37,150. Move the stop-loss further down to 36,820 as soon as the index touches 35,900. Book profits at 35,400.

Global cues

It was a volatile week for the Dow Jones Industrial Average. The index tumbled over 1,000 points intraday on Monday to make a low of 33,150.33 but then recovered back sharply to close in the green. The index oscillated around 34,000 all through the week and seems to lack clarity on the direction. It has closed at 34,725.4, up 1.34 per cent for the week.

Important to note is that the Dow is getting bought on every dip below 34,000. This is a positive sign. It is significant to see if the Dow manages to sustain above 34,000 this week and breaks above 35,000 decisively. Such a break will be bullish to see 36,000-37,000 levels on the upside again. The Dow will need a strong close below 34,000 to signal bearishness and fall again to 33,000. In such a scenario, the fall can extend even up to 32,000 - the next important support for the Dow. As such the price action in the coming week will need a close watch to see if the Dow can sustain above 34,000 or not.

What to watch

Union Budget on Tuesday

Resistance :-

at 17,500-17,750 in Nifty,

at 58,000-59,000 in Sensex.