Technical View: Further weakness may drive Nifty towards crucial support of 24,000; India VIX at 21 suggests caution for bulls

Nifty Downtrend

The Nifty 50 decisively dropped below 24,400 in the second half and closed six-tenths of a percent lower on May 8, following escalating tensions between India and Pakistan, and the Federal Reserve officials' decision not to cut interest rates further, citing increased risks of higher unemployment and inflation.

However, the index managed to defend the 24,200 level as well as the previous day's low on a closing basis. If it decisively breaks this level in the upcoming session, the index may extend its southward journey toward 24,000. On the other hand, any rebound may face resistance in the 24,400–24,450 zone, according to experts.

The Nifty 50 opened higher at 24,432 and hit an intraday high of 24,447, before slipping firmly into the red in the second half. The index touched a day's low of 24,150 in late trade, before closing at 24,274, down 141 points, and forming a bearish candlestick with a lower shadow on the daily charts, indicating weakness, though there was some buying interest at lower levels.

“A follow-through weakness below Thursday's low (24,150) can lead to an extension of the decline toward 24,000 levels. Broadly, Nifty is expected to continue its consolidation within the 24,000–24,600 zone — a range it has held over the past eight sessions. Strong support lies between 24,000 and 23,800,” said an analyst at Bajaj Broking Research.

According to the analyst, only a sustained close above the resistance zone of 24,550–24,600 could pave the way for an upward move toward the December 2024 high of 24,850 in the near term.

The weekly options data also suggested that the Nifty is expected to remain in the range of 24,000–24,500 in the short term, while the broader range lies between 23,800 and 25,000.

The maximum Call open interest was seen at the 25,000, followed by the 24,400 and 24,500 strikes. The maximum Call writing was observed at the 24,000 strike, followed by 24,400 and 24,300 strikes.

On the Put side, the 24,000 strike held the maximum Put open interest, followed by 24,400 and 23,800 strikes. The maximum Put writing was at the 24,000 strike, followed by 24,200 and 24,300 strikes.

The Bank Nifty index defended the previous day's low on an intraday basis and closed 245 points down at 54,366, with above-average volumes, while maintaining a higher high–higher low formation. The index recorded an intraday high of 54,937 and a low of 54,108, eventually forming a bearish candle with minor upper and lower shadows on the daily timeframe.

“Momentum is missing at higher levels, but multiple supports are intact at lower zones as the index is hovering near its 20-day exponential moving average (20 DEMA),” said Chandan Taparia, Senior Vice President and Head – Technical Research and Derivatives at Motilal Oswal Financial Services.

According to him, the index needs to hold above the 54,250 zone for a potential bounce toward 55,000, and then 55,250 levels. On the downside, support is seen at 54,000, followed by 53,750 zones.

Meanwhile, the India VIX — the fear index — spiked sharply due to the escalation in tensions between India and Pakistan, rising 10.22 percent to 21.01, marking the highest closing level since April 9, and signaling increased caution for the bulls.