On the last trading day of the week, the benchmark Nifty index started off on a weak note and continued to move lower as the day progressed thereby snapping its 6-day gaining streak, which was fueled by optimism over Goods and Services Tax (GST) reforms & S&P Global Ratings upgrade.
Concerns over impending 25% US Tariffs, unsettled sentiment, with the White House Trade Advisor Peter Navarro warning that the secondary tariffs against Indian goods will kick in from August 27. Finally, the Nifty closed below the psychological level of 25,000 and settled lower at 24,870, with a loss of 0.85%.
As we head to the monthly expiry week, investors will be keenly awaiting U.S Federal Reserve Chair Jerome Powell’s speech at the annual Jackson Hole symposium, which can significantly influence September’s monetary policy decision.
Among the Nifty constituents, M&M and Maruti emerged as the top gainers. On the flip side, Ultracemco & Heromotoco were the major laggards, dragging on the index. Sectorally, Nifty Media and Pharma indices, ended in green. In contrast, majority of the sectors ended in red with Nifty Metal and Nifty PSU Bank, emerging as major losers, as investors booked profit in these segments.
The broader markets painted a slightly different picture. Unlike the frontline indices, which saw intense selling throughout the day, both Nifty Midcap 100 and Nifty Small cap 100 traded sideways and closed flat, ending 0.14% and 0.26% lower respectively. Market breadth deteriorated, as the advance-decline ratio tilted in favour of the decliners. Out of the Nifty 500 universe, 338 stocks closed in the red, reflecting strong bearish sentiment.
Nifty View
The benchmark Nifty index snapped its 6-day gaining streak on Friday and gave a lower close on the daily chart. The Index has formed an evening star candle pattern on the daily chart, which is considered to be a bearish reversal signal.
Interestingly, the formation of the evening star pattern on the daily chart coincides with the 61.8% Fibonacci retracement of the prior downward move (25669-24337) from 30th June until 8th August, enhancing the probability of a trend reversal on the downside.
However, post the formation of the candle pattern, most crucial step is to wait for a confirmation, ideally another lower close on Monday, which can confirm that the current pullback might be losing steam and sellers have taken control, with the trend likely to reverse downwards.
Talking about crucial levels, the zone of 24850-24800 will act as an immediate support for the index. Any sustainable move below the level of 24800 will lead to a sharp movement on the downside up to the 24650 level. While on the upside, the zone of 25100-25150 will act as immediate resistance for the index.
Bank Nifty View
The banking benchmark index, Bank Nifty, was consolidating in 579 points range in the first four trading session of the week, before breaking down sharply on Friday, closing at 55,149, down 1.09%. Leading the decline were constituents like HDFC Bank (-1.34%), Kotak Bank (-1.55%) & Axis Bank (-0.74%), indicating sectoral undercurrent of profit-taking.
With Friday’s closing, the Index now trades below both its key short-term moving averages of 20 & 50 DEMA. The Relative Strength Index (RSI), a momentum indicator tilting downwards, reinforcing the bearish sentiment prevailing in the Index.
Bank Nifty, on the other hand, has been relatively underperforming Nifty, for nearly a month, as indicated by a falling ratio line on the Bank Nifty/Nifty ratio chart.
Going ahead, the zone of 55000-54900 will act as an important support. Any sustainable move below the level of 54900 will lead to a sharp downside move up to the level of 54500, followed by 54100 in the short term. While on the upside, the zone of 55800-55900 will act as important resistance for the index.
