Bears were in the lead due to heavy losses in major Indian indices throughout the week. The Nifty hit the budget low on all the five days of the week. Aggressive comments from FOMC members exacerbated market woes as they battled for more big hikes following a firm labor market in the US. Besides, the weakness of INR added to the downside in Indian stocks.
Technically, Nifty is back in the falling channel, increasing the chances of further downside. On the daily chart, the benchmark Nifty has given an upward consolidation breakdown, again suggesting increasing bearishness. The 50-DMA, the longer-term moving average (17944), is staying below the shorter-term moving average, the 14DMA (17803), on the daily chart, indicating a bearish crossover. Also, the price is currently trading well below important near-term moving averages, with the momentum oscillator RSI (14) slipping below the 50 reading.
The current setup is likely to keep Nifty under pressure, with a possible downside correction towards 17,150-17,200 in the short term. Again, a break below 17,150 could lead to a correction towards 16,750. While, at the higher end, key resistance is placed at 17,800, any rally is likely to get sold till the Nifty sustains below 17,800.
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Meanwhile, bears in Bank Nifty attacked the market with full force throughout the week and the index crossed its support area of 41,000. The undertone remains bearish with immediate resistance at 40,600 level. The immediate support of the index lies at 39,500, and if it fails to maintain this support on a closing basis, selling takes the index towards the 38,000 level.
Mid, Small-Cap Performance
The broader markets also witnessed an onslaught of bears as the Nifty Midcap and Smallcap indices ended the week down 1.76% and 2.08%, respectively.
Among the sectoral indices, the Nifty Metal index remains strong. The weakness is due to an interest rate hike coming closer to 5%, which was earlier expected to peak, but it now appears that rates will exceed 5%, correcting base metals.
Meanwhile, the Nifty Oil & Gas index has fallen heavily in the last few weeks. Earlier, it declined below an uptrend on the daily chart. However, at the lower end the index has moved closer to the support level of the previous swing low. The momentum indicator is deep in the oversold zone. Consequently, in the current situation, the possibility of recovery cannot be ruled out.
The author, Rupak Dey is a Senior Technical Analyst at LKP Securities
The views and recommendations given above are those of individual analysts or broking companies and not of Mint. We advise investors to do due diligence with certified experts before making any investment decision.
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