Markets in bubble zone? Tech charts say Sensex to hit 53,000 soon

Nifty50's stability above 15,300-mark shows a further breakout towards 15,700 and 16,000 levels, as per the weekly chart

The benchmark Nifty50 index added another milestone to its journey when it scaled a fresh record peak of 15,455.5 on Friday. The feat comes just a day after the Reserve Bank of India issued caution over the meteoric rise in stock prices amid a ravaging Covid-19 pandemic.

India's benchmark indices have more than doubled from the post-pandemic lows made in March 2020 while several individual companies have seen multi-fold jump in their stock prices. In May alone, nearly a dozen Nifty50 stocks have hit a lifetime high. These include State Bank of India, Wipro, Bajaj Finserv, Tata Steel, and JSW Steel. IT companies dominate the list of stocks that hit lifetime highs this year, followed by banks and financial services. READ ABOUT IT HERE

This, even as the economy has headed south. "This order of asset price inflation in the context of the estimated 8 per cent contraction in GDP in 2020-21 poses the risk of a bubble," the RBI said in its annual report on Thursday.

At the moment, markets are standing at crossroads where global economies are clocking a rebound in economic activities while the Indian economy's outlook remains mildly ambiguous amid the second wave of the coronavirus pandemic. As inflation inches up in major economies like the US and Europe, investors are concerned whether the era of loose monetary policies is over. The RBI too opines that "calibrated unwinding" might be needed.

"Liquidity injected to support economic recovery can lead to unintended consequences in the form of inflationary asset prices and providing a reason that liquidity support cannot be expected to be unrestrained and indefinite and may require calibrated unwinding once the pandemic waves are flattened and real economy is firmly on recovery path," it said. READ HERE

Nonetheless, bullish forecasts continue to pour in for the domestic indices as investors eye growth post recovery from the second wave. Against this backdrop, here is how the main indices look on charts:

S&P BSE SENSEX

Likely target: 52,550 - 53,000 (after breaking out above 52,800 mark)

Upside potential: 1.45 - 2.32

The immediate resistance for the index falls around 51,800-mark. If it overcomes this hurdle, then the breakout rally may see an upside towards a historic time high of 52,550 and 53,000 levels. The Relative Strength Index (RSI) has broken out of the 58 value, suggesting strength to favour the bullish outlook in the upcoming sessions. Till the index defends the support of 50,200 levels, strength over the medium-term remains intact.  CLICK HERE FOR THE CHART

NIFTY50

Likely target: 15,700 - 16,000

Upside potential: 1.82% - 3.76%

Although, the index is witnessing a bearish divergence on the weekly RSI, the strength has not seen even a mild weakness. This is due to the positive crossover of 50-weekly moving average (WMA) and 100-WMA. The stability above 15,300-mark shows a further breakout towards 15,700 and 16,000 levels, as per the weekly chart. Going forward, as long as the index decisively decline below 15,000-mark, the direction is anticipated to stay in the bullish.  CLICK HERE FOR THE CHART

NIFTYBANK

Likely target: 36,000 - 36,500

Upside potential: 2.04% - 3.46%

The index has conquered the resistance of 34,700 levels and has broken out on the upside. The overall trend is heading towards 36,000 to 36,500 levels, as per the daily chart. Going forward, the index needs to defend the support of 34,500 to hold the optimistic sentiment. The Moving Average Convergence Divergence (MACD) has crossed the zero line upwards, indicating the rising trend. CLICK HERE FOR THE CHART