Sudeep Shah, Head – Technical Research and Derivatives at SBI Securities.
On the August series expiry day, the benchmark index Nifty extended its losing streak, ending at the 24500 mark with a cut of 0.85%. The index also formed a sizeable bearish candle, signalling sustained selling pressure. From its recent high of 25153, Nifty has now corrected by more than 650 points in just five sessions.
Among Nifty constituents, Titan and Coal India emerged as top gainers, while Shriram Finance and HCL Tech were the biggest losers. On the sectoral front, barring Nifty Consumer Durables, all indices closed in the red, with Nifty IT, Nifty Realty and Nifty Financial Services witnessing the steepest declines.
The broader market too bore the brunt of selling pressure. Both the Nifty Midcap 100 and Nifty Smallcap 100 indices slipped over 1% for the second consecutive session. Market breadth remained weak, with the advance/decline ratio skewed towards losers. Out of the Nifty 500 pack, only 101 stocks managed to end in positive territory.
Nifty View
Technically, the Nifty is showing strong signs of weakness. The index is now trading below its 20-day, 50-day and 100-day EMAs, all of which have started to edge lower, reflecting a build-up of downward momentum. This alignment of key averages turning south indicates that short-term as well as medium-term trends are under pressure.
Adding to the concern, the daily RSI is on the verge of slipping below the crucial 40 mark and continues to remain in a declining trajectory. A breach of this level would further strengthen the bearish undertone, suggesting that momentum is favouring sellers over buyers.
From a technical perspective, unless the Nifty reclaims its short-term moving averages with strong volume support, the bias is likely to remain negative in the near term. Going ahead, the 100-day EMA zone of 24630–24650 is expected to act as a crucial hurdle for the Nifty. As long as the index remains below this zone, the overall sentiment is likely to stay weak. On the downside, the index may first drift towards 24350, and a sustained breach of that support could open the gates for a further slide towards the 24200 level.
A decisive move above 24650 would be needed to negate the bearish momentum and signal the possibility of a short-term recovery. Until then, the market trend remains tilted in favour of the bears.
Bank Nifty View
The Bank Nifty index has been underperforming the frontline indices for the past few trading sessions. From its recent peak of 56156, the index has corrected by more than 2300 points in just 8 sessions, highlighting strong selling pressure in the banking space.
At present, the index is trading below its 20-day, 50-day and 100-day EMAs and is inching closer to its 200-day EMA, which lies in the 53600–53500 zone. A sustained move below the 53500 mark could accelerate the downside momentum, paving the way for a further decline towards 52900, followed by 52400 in the short term.
On the flip side, the 54500–54600 zone will act as a key hurdle. Only a decisive move above this band would indicate signs of recovery and provide some respite to the bulls.
