Technical View: Bears tighten grip over Nifty, may drag it down to 22,800; bloodbath likely in Bank Nifty if it breaks 47,870

Nifty Downtrend

The Nifty 50 failed to find respite even on the first trading day of the week, falling by 1.5 percent on January 13, following a 2.4 percent loss in the previous week. The index has decisively broken the 61.8% Fibonacci retracement level (measured from the June low to the record high in September) after slipping below the November low of 23,260, signaling further weakness. All technical indicators, including momentum and moving averages, suggest that the bears maintain strong control over Dalal Street.

The India VIX, a measure of market volatility, reached its highest level in over seven weeks. As a result, experts predict the benchmark Nifty could continue its downward trend toward 22,800 (the low of the long green candle on June 7), followed by 22,350 (the 78.6% Fibonacci retracement level). However, if a bounce-back occurs due to short-covering, immediate resistance levels are likely to be around 23,350, followed by 23,600, according to market analysts.

Multiple factors contributed to the selling pressure in the market, including a spike in the US Dollar Index, a weakening Indian rupee, consistent FII (foreign institutional investor) selling, rising oil prices, and caution ahead of Donald Trump's inauguration as the US President next week.

The Nifty 50 opened over 200 points lower at 23,195 and remained under pressure throughout the session, closing with a loss of 346 points (1.47 percent) at 23,086, accompanied by above-average volumes. The index formed a bearish candlestick pattern on the daily charts, continuing its trend of lower highs for the seventh consecutive session. Momentum indicators remained negatively biased.

From a technical perspective, this pattern suggests a decisive downside breakout from the symmetrical triangle pattern, indicating a lack of strength to initiate a rebound. The immediate support level at 23,260 was breached, and the market now appears poised to test lower levels.

According to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, "The underlying trend of Nifty continues to be weak. Nifty is on its way down to the next lower support of around 22,800-22,700 levels. Any pullback up to 23,350 could be a sell-on-rise opportunity."

Options data further supports this view. On the Call side, maximum open interest was observed at the 24,000 strike, followed by the 23,500 and 23,400 strikes. Maximum Call writing occurred at the 23,300 strike, followed by the 23,500 and 23,400 strikes. On the Put side, the 23,000 strike held the maximum open interest, followed by the 22,500 and 23,100 strikes, with maximum writing at the 23,100 strike, followed by 23,000 and 23,200 strikes.

This weekly options data suggests that the index may trade within a range of 22,500–24,000 in the upcoming sessions.

The Bank Nifty also opened with a significant gap down, losing 693 points (1.42 percent) to close at 48,041. It formed a bearish candlestick pattern with a long upper wick on the daily timeframe, indicating a lack of demand at higher levels. The index is approaching the 78.6% Fibonacci retracement level at 47,870. A decisive break below this level could lead to a further fall toward the June low near 46,000, given the weakness across all technical indicators.

Chandan Taparia, Senior Vice President | Head – Technical Research and Derivatives at Motilal Oswal Financial Services, stated, "As long as the banking index remains below the 48,500 zone, weakness could extend toward 47,500, and then to 47,250 levels. On the upside, resistance is seen at 48,250 and subsequently at 48,500 zones."

Meanwhile, the India VIX, or fear index, surged by 7.26 percent to reach the 16 mark, the highest closing level since November 22, 2024, further exacerbating challenges for the bulls.