Weekly view on nifty and bank nifty – 13th May 2022

The last two weeks witnessed a fall of around 4% in each week for both of the key indices, Nifty50 as well as the Banknifty. This fall is one of sharpest fall in recent times and the Nifty is down 12% and the Banknifty is down 16% from the recent high made in April 2022.

Against this background, investors are concerned whether there is a further downside awaiting or if there would be a bounce after this fall. The instability in the macroeconomic cues with no resolution in sight to the Russia-Ukraine conflict, rising crude prices as well as inflation across the board. Due to these factors institutional funds are withdrawing from the Indian markets causing a selling pressure leading to a sharp fall.

Let us look at what the next week holds in terms of price movement on the Nifty and the Banknifty for the week starting 16th May 2022.

The Nifty has been trading in a range of 16000-18000 for the past few months. It managed to cross 18000 for three times in the last six months but could not sustain and retreated to 16000 levels. The last time it touched 18000 levels was on 4th April 2022, after which it has been falling till the close of last week

During this fall, it has also broken the 100- and 200-day exponential moving averages, indicating a technical weakness.

 

Nifty trading below 100 as well as 200 day exponential moving averages at end of last week

 

This week is crucial as it will determine whether the Nifty would bounce back after touching the previous support level of 15750 or will it continue to slide further. There are two scenarios possible and both are likely to show a sharp price movement.

In the first case, if the Nifty bounces from the support level, it is likely to cover most of the fall over the last week and close the week 500 points higher. 

In the other case, Nifty closes below the support level for the first trading days of the week and then moves further down causing further weakness.

The closing of the first trading day of this week will determine if the Nifty is ready to bounce back or not.

 

Start of next week crucial to determine rest of the weeks movement

 

Banknifty’s progression over the last month has followed the pattern of Nifty. From a peak of 38500 on 4 April 2022, it is down to 33121 at closing of last week. Similarly, it has also broken the 100 and 200 day exponential moving averages in the past month. Currently its is trading close to its previous support level of 32000.

 

Banknifty is trading below 100 and 200 exponential averages and 100 points above support level

 

For this week, it is possible that the Banknifty bounces back from current levels or head further down with market weakness.

The higher probability is that, it is most likely to test its previous support at 32000 before giving clear direction. 

 

Banknifty is most likely to test the support level first in this week before a decisive direction

 

In either case, as with Nifty, whichever price direction it takes it will be accompanied by a sharp price movement.

As we enter the next trading week, the first trading days will give a clue on which way we would end the week. It remains to be seen whether the Nifty decides to bounce back and whether the Banknifty will test its immediate support before a bounce.