Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities
After closing below its 50-day EMA in the previous session, Nifty Index drifted further lower and also confirmed a breakdown of its rising trendline on the daily chart, closing below the 25,700 level. The RSI has slipped below the 40 mark, signaling strengthening bearish momentum. Meanwhile, the DI– has crossed above DI+ on the ADX indicator, indicating that downside strength is beginning to dominate the trend. From its all-time high of 26,373 recorded on 5th January, the Nifty has now corrected about 2.62% over the last four trading sessions, highlighting the shift from consolidation to a short-term corrective phase.
On the sectoral front, Nifty Oil & Gas ended the day as the top sectoral gainer, followed by Nifty IT, which managed to close in the green. On the other hand, Nifty Realty and Nifty Auto emerged as the top two sectoral losers. With regards to stocks, Asian Paint & ONGC emerged as the top stock gainers amongst the Nifty pack while Adani Enterprises & NTPC emerged as the top two losers.
The Midcap index has slipped below its 50-day EMA and extended its weakness after forming a strong bearish candle in the previous session. The Smallcap index has corrected 3.8% over the last two sessions and has also closed below its previous swing low of 17,407, made on 30th December. This breakdown suggests that broader market participation is now turning risk-averse.
The market breadth deteriorated with the advance-decline ratio heavily skewed in the favour of bears at day’s close. A total of 414 stocks out of the Nifty 500 universe ended in the red. The selling was broad based and not just limited to few heavyweight counters.
Nifty View
Going ahead, for Nifty, the 100-day EMA zone of 25,600-25,550 will act as an immediate support. Any sustained move below the 25,550 level could lead to Index extending its weakness further down towards the 25,400 level, followed by 25,250. On the upside, the zone of 25,850-25,900, which coincides with the rising trendline zone, will act as an as immediate resistance.
Bank Nifty View
Bank Nifty closed below its 20-day EMA for the first time since 29th December, a sign that the short-term uptrend is losing steam. The RSI is trending lower, pointing to weakening momentum, while DI– is on the verge of crossing above DI+. If this crossover materializes, it would indicate that selling pressure is overtaking buying interest, increasing the risk of a deeper pullback in banking stocks.
Going ahead, for Bank Nifty, the rising trendline zone of 59,100-59,000 will act as an immediate support. Any sustained move below the 59,000 level could lead to Index extending its weakness further down towards the 58,500 level. On the upside, the zone of 59,500-59,600 will act as an as immediate resistance.