Technical View | More weakness likely if Nifty closes below 19,500

The Nifty closed at 19,527, down 207 points.

Indian shares joined the global meltdown triggered by Fitch’s surprise downgrade of US sovereign credit rating, with equity benchmarks ending over a percent lower on August 2.

After opening lower at 19,655, the Nifty remained under pressure to sink to the day's low of 19,424 but some buying in the last hour helped trim some of the losses. The index closed at 19,527, down 207 points, or 1.05 percent.

It formed a bearish candlestick with long lower shadows on the daily charts, indicating buying support at lower levels. It took support at 19,500, which also coincided with the horizontal resistance trendline.

A break of this support zone can add to the selling pressure and the index can fall to 19,300. Immediate resistance is at 19,600-19,700.

"The Nifty's recent slip below its consolidation indicates a bearish sentiment. The index has also dropped below the 21-day EMA (exponential moving average placed at 19,548), reinforcing the bearish outlook," Rupak De, senior technical analyst, LKP Securities, said. Momentum indicator, the Relative Strength Index, too, is signalling bearish momentum.

On the downside, support is at 19,500. A decisive fall below 19,500 can add to weakness, while resistance is at 19,600, he said.

The options data, too, indicates that 19,600-19,700 can be the immediate resistance for the Nifty, with support at 19,500-19,400. Critical support is likely at 19,000.

The maximum Call open interest was at 19,800 strike, followed by 19,700 and 19,600 strikes, with Call writing at 19,600 strike, then 19,500 and 19,700 strikes. The maximum Put open interest was at 19,500 strike, followed by 19,000 and 19,400, with Put writing at 19,400 strike, then 19,200 and 19,000.

Bank Nifty

Bank Nifty also opened lower, mirroring the benchmark. It ended the day at 44,996, down 597 points, or 1.3 percent, after three days of consolidation.

It formed a bearish candlestick with a long lower wick on the daily scale, indicating the emergence of buying support at lower levels.

The index is close to its 50-day EMA (44,646) and also near the critical support of the horizontal resistance trendline at 44,500. If it slips below the said levels, the banking index can see more selling, while the resistance is at 45,500.

"The immediate hurdle is expected to be around 45,400 – 45,500, which corresponds to the breakdown levels. On the contrary, the low of today, around 44,700, along with the previous swing low at 44,500, is likely to provide the next immediate support zone," Rajesh Bhosale, technical analyst, Angel One, said.

The broader market also corrected sharply. The Nifty midcap 100 index fell 1.3 percent and the smallcap 100 1.6 percent.

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