The Indian benchmark indices, the Sensex, Nifty 50 and Nifty Bank were beaten down last week. Sensex and Nifty were down over 2 per cent each. The Nifty Bank index on the other hand tumbled over 4 per cent.

Among the sectors, the BSE IT, up 1 per cent, was the only sector that was in the green last week. The BSE Power index fell the most. It was down 8.73 per cent. The BSE Realty and BSE PSU indices were down over 7 per cent each.

FPIs sell-off

Strong sell-off from the Foreign Portfolio Investors (FPIs) weighed on the Indian equity markets last week. The FPIs sold about $2.08 billion in the equity segment last week. For the month of January, the equity segment has seen a net outflow of about $2.58 billion so far. Further selling from the FPIs can drag the Sensex and Nifty more lower from here in the coming days.

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Nifty 50 (23,431.50)

Nifty fell breaking below the key support level of 23,500.  The index touched a low of 23,344.35 before closing the week at 23,431.50, down 2.39 per cent.

Short-term view: The outlook is bearish. Resistances are at 23,500 and then at 23,750-23,800. Nifty can fall to 23,200 immediately. A corrective bounce thereafter to 23,400-23,500 is a possibility. Thereafter the index can turn down again and fall below 23,200 targeting 23,000 on the downside.

Nifty has to rise above 23,800 to ease the downside pressure. Only then the upside will open for a test of 24,100. However, the index has to surpass 24,100 in order to turn the short-term outlook bullish.

Medium-term view: The downside is open to see 22,500 or even 22,000 (in a worst case scenario). But the region around 22,500 is a very strong long-term support. So, we expect the current fall to halt around 22,500.

A fresh rally from around 22,500 will have the potential to breach 24,000. That can take the index up to 25,000-26,000 initially. From a long-term perspective, the new leg of upmove from around 22,500 will have the potential to take the Nifty up to 28,000-28,500 this year.

As such, a fall to 22,500 is going to give us a very good long-term buying opportunity. So, as the Nifty falls below 23,000 one has to start looking at the market from the buy side rather than getting more panic.

Nifty Bank (48,734.15)

Contrary to our expectation, the Nifty Bank index has broken its 49,650-54,470 range on the downside. The index has closed the week at 48,734.15, down 4.42 per cent.

Short-term view: Immediate supports are at 48,500 and 47,950 which can be tested this week. A bounce from either of these two supports can give the index a relief rally to 49,800-50,000. But, a break below 47,950 will increase the selling pressure. If that happens, the Nifty Bank index can tumble to 47,000-46,800 in the short term.

From a big picture, Nifty Bank index will now have to break the 50,000-50,500 resistance zone to turn the sentiment positive.

Medium-term outlook: Our view of the Nifty Bank index to sustain above 49,000 has gone wrong. Now, it looks like the downside is open to see 47,000-46,800 as long as the index stays below 50,000. We will have to wait and see if the index is managing to bounce back from the 47,000-46,800 support zone or not.

Sensex (77,378.91)

Sensex has declined below the key support level of 78,000. It touched a low of 77,099.55 and has bounced slightly from there. The index has closed the week at 77,378.91, down 2.33 per cent.

Short-term view: The outlook is negative. Resistances are at 78,000 and then in the 78,500-79,000 region. Sensex can fall to 76,000 in the short term. A break below 76,000 can see an extended fall to 75,500. A fall beyond 75,500 is less likely.

After this fall we can expect the Sensex to reverse higher and rise towards 78,000-79,000 again.

Medium-term view: The region between 75,500 and 75,350 is a strong support zone for the Sensex. We can expect the current fall to halt in this support zone. A fresh rise from around 75,500-75,350 can reverse the downtrend. From a long-term perspective, this rally will have the potential to take the Sensex up towards 90,000 and higher this year.

So, the fall to 75,500 will be a very good buying opportunity from a long-term perspective.

Dow Jones (41,938.45)

The Dow Jones Industrial Average continues to trade under pressure. The resistance at 43,000 has held very well and the fall to 42,000 has happened in line with our expectation. Dow Jones fell to a low of 41,877.30 on Friday before closing the week at 41,938.45, down 1.86 per cent.

Outlook: The broader trend remains down. Immediate resistance will be in the 42,300-42,400 region. The Dow Jones can fall to 41,500-41,300 this week. After this fall, there are good chances to see a bounce-back towards 42,000-42,500. The price action after this bounce-back move will need a close watch to see if the rise is extending towards 43,000 and higher.

Failure to sustain the bounce and a reversal again will be quite bearish. That will keep alive the danger of the Dow Jones tumbling towards 39,000-38,000 going forward.

From a big picture, the Dow Jones will have to get a sustained rise above 43,500 to indicate a trend reversal. Only then the bullish view will come back into the picture.

For now, we will brace for a fall to 41,500-41,300 and then look for a bounce towards 42,000-42,500.