Technical View: Nifty sees biggest single-day loss in 3 months, 23,500 make-or-break level for bulls, Bank Nifty goes below 50k

Nifty Downtrend

The Nifty 50 had a disappointing start to the week, wiping out all of its previous week's gains and closing 1.6% lower on January 6, marking its biggest single-day loss in the last three months. Meanwhile, the India VIX surged sharply, raising concerns among bulls. The index has fallen below the crucial 200-day EMA (23,700) with above-average volumes and is now trading below all key moving averages. If it fails to take support at the 23,450-23,500 zone (which coincides with the December low and an upward-sloping support trendline) in the upcoming sessions, the selling pressure could extend toward the November low of 23,263. However, in the event of a rebound, 23,700 is the immediate resistance zone, experts say.

After opening flat, the Nifty 50 attempted to hold onto the 24,000 mark but lost strength after the first hour of trading and remained negative for the rest of the day. The index closed at 23,616, down 389 points (1.62%)—its biggest single-day loss since October 3—and formed a long bearish candlestick pattern on the daily charts with a lower high-lower low formation. Additionally, there was a negative crossover in the momentum indicator RSI (Relative Strength Index at 40.7), indicating further weakness.

Selling pressure was observed across sectors, with market participants awaiting the start of the December quarter earnings season later this week. Concerns over the human metapneumovirus (HMPV), consistent FII selling, and a weakening rupee against the US dollar appear to be contributing to the selling pressure.

Shrikant Chouhan, Head of Equity Research at Kotak Securities, believes that while the current market sentiment is weak, it is also oversold. He advises that level-based trading would be the ideal strategy for day traders.

For day traders, as long as the market remains below 23,750, weak sentiment is likely to persist. If the index falls below this level, it could retest the 23,500 mark, and further downside may be possible, potentially dragging the index down to 23,400, he said.

According to derivative data, the maximum Call open interest was seen at the 24,500 strike, followed by the 24,200 and 24,000 strikes, with maximum Call writing at the 23,400 strike, followed by 24,500 and 24,200 strikes. On the Put side, the 23,000 strike holds the maximum open interest, followed by the 23,300 and 23,500 strikes, with maximum Put writing at the 23,300, and then at the 22,800 and 22,850 strikes.

The weekly options data indicates that the Nifty may remain within a broad trading range of 23,000-24,500, with immediate support at 23,500 and resistance at 24,000.

Bank Nifty

The Bank Nifty has seen a more significant correction than the benchmark Nifty 50, falling below the 50,000 mark, down 1,067 points (2.09%), marking its biggest single-day loss since November 13, to close at 49,922—the lowest closing level since August 14.

The index has broken below the November low and fallen decisively below the 200-day EMA (50,492). A large bearish candlestick has formed on the daily charts with above-average volumes, and there was a negative crossover in the momentum indicators RSI and MACD, signaling weakness.

"Until it holds below the 50,250 zone, weakness could persist, with potential support at 49,500 and 49,250 levels. On the upside, resistance is seen at 50,250, followed by 50,500," said Chandan Taparia, Senior Vice President and Head of Technical Research and Derivatives at Motilal Oswal Financial Services.

Meanwhile, the India VIX, the volatility index, soared by 15.58% (the biggest single-day surge since August 5) to 15.65, its highest level since November 22, making bulls increasingly uncomfortable.