Technical View: More weakness likely if Nifty decisively breaks 100-week EMA, Bank Nifty defends 48,300

Nifty Under Pressure

The Nifty 50 has decisively broken the last three-day consolidation as well as the 22,500 support after a gap-down opening and fell below the 20-month EMA for the first time since June 2020 (the COVID period), forming a long bearish candle on the daily, weekly, and monthly charts, signaling more weakness ahead.

The index is now closer to the 100-week EMA (Exponential Moving Average) of 22,042. If the index breaches this zone, the next support is placed at 21,800 (the low of June 5, 2024), followed by 21,281 (the Lok Sabha elections results low). However, in the case of a rebound, the 22,300-22,400 range is the level to watch, according to experts.

The Nifty 50 opened sharply lower at 22,433 and extended its southward journey as the day progressed. It touched an intraday low of 22,105, before closing at 22,125, down 420 points or 1.86 percent—the biggest single-day loss since October 3, 2024. The momentum indicator RSI (Relative Strength Index) dropped to 22.40, the lowest level since March 2020 (the COVID period).

Additionally, there are unfilled opening downside gaps in the last few sessions, which indicates the formation of bearish runaway gaps. These unfilled gaps are typically formed in the middle of a trend. Hence, more weakness is expected for the upcoming week, said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.

According to him, the underlying trend of the Nifty is sharply down. "Having moved below the immediate support of 22,400 (20-month EMA), Nifty could now slide down to the next lower supports of 21,800-21,700 levels (swing lows of March-April 2024) in the coming week. Immediate resistance is placed around 22,300," he said.

The options data also indicated that the Nifty may find key support at 21,800 and resistance at the 22,300-22,500 zone.

As per the weekly derivative data, the maximum Call open interest was seen at the 22,500 strike, followed by the 23,000 and 22,300 strikes, with the maximum Call writing at the 22,500 strike, followed by the 22,300 and 23,000 strikes. On the Put side, the 21,800 strike holds the maximum open interest, followed by the 21,500 and 22,000 strikes, with the maximum Put writing at the 21,800 strike, followed by the 21,300 and 22,100 strikes.

The broader markets were hit quite hard, with the Nifty Midcap and Smallcap 100 indices down by 2.5 percent and 3 percent, respectively. The Nifty IT and Auto indices plunged 4 percent each, while the Nifty FMCG declined by 2.6 percent.

Bank Nifty

The Bank Nifty performed much better than the other indices, outperforming the benchmark Nifty 50. The banking index corrected by 399 points (0.82 percent) to 48,345 and took support at 48,300 on a closing basis. The index formed a bearish candle with a minor upper and long lower shadow on the daily charts, indicating buying interest at lower levels.

With broader indices failing to stage a bounce, this recovery could be short-lived, Anshul Jain, Head of Research at Lakshmishree Investments, said.

According to him, for bears to take control, the index must sustain below 48,250, which could trigger a sharp decline toward 47,950. On the upside, any rallies toward 48,500-48,600 are expected to face strong selling pressure, he said.

Meanwhile, the volatility index, India VIX, snapped its seven-day losing streak, rising 4.53 percent to 13.91, but it is still looking favourable for bulls.

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