Technical View: Selling pressure to intensify if Nifty decisively breaks 23,400 zone, Bank Nifty extends losses

Nifty Downtrend

The benchmark Nifty 50 snapped its seven-day winning streak on profit booking and closed eight-tenths of a percent lower on March 26, a day before the monthly expiry of derivative contracts. This correction was expected, given the sharp run-up seen from the previous week, which is generally considered healthy. The immediate support is expected to be 23,400, which coincides with the 200-day EMA. If the index decisively breaks this level, the selling pressure may extend toward the 23,200-23,000 zone. However, on the higher side, 23,800 is likely to remain a key hurdle going ahead, experts said.

The Nifty 50 opened higher at 23,701 but could not sustain those gains for long. It traded lower for most of the session and closed at 23,487, down 182 points, forming a long bearish candlestick pattern on the daily charts, indicating the beginning of a short-term downward correction in the market after a sharp rise.

Bullish chart patterns, such as higher tops and bottoms, have started to form on the daily chart. The current weakness could be in line with the formation of a new higher bottom, according to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.

He stated that the market is in a healthy downward correction, and one may expect the Nifty to bounce back shortly after forming a higher bottom. "The next lower supports are placed around the 23,400-23,200 levels. Any bounce from near the support could challenge the key hurdle again at the 23,800 levels," he said.

The monthly options data suggested that the trading range for the Nifty 50 in the short term remains between the 23,000-24,000 zones.

On the Call side, the 24,000 strike holds the maximum open interest, followed by the 24,100 and 24,500 strikes, with the maximum writing at the 23,600 strike, and then the 23,500 and 23,700 strikes. On the Put side, the maximum open interest was placed at the 23,000 strike, followed by the 22,500 and 23,500 strikes, with the maximum Put writing at the 22,600 strike, and then the 23,400 and 23,450 strikes.

Bank Nifty

The Bank Nifty extended losses for another session, falling by 399 points (0.77%) to 51,209 and forming a long bearish candlestick pattern on the daily timeframe, indicating weakness in the immediate term.

According to Anshul Jain, Head of Research at Lakshmishree Investments, a dip toward the overlapping support zone of 50,600-50,500 is highly likely, presenting a buying opportunity for traders. A rebound from support could reignite momentum for the next leg higher, he said.

Meanwhile, the India VIX, the fear index, fell further by 1.21 percent to the 13.47 zone. It needs to decline further to below the 13 zone for the bulls to feel comfortable.

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