The Indian stock market extended losses for the fifth straight session, with Sensex and Nifty falling more than 1% during the day before paring most of the losses and closing down 0.4% each on Friday as oil prices above $100 a barrel, FII selling and other factors spooked investors.
Analyst Sudeep Shahvice-president and head of technical research and derivatives at SBI Securitiesinteracted with ETMarkets regarding the outlook for the Nifty and the bank, as well as an index strategy for the coming week. Here are edited excerpts from his conversation:
Nifty slipped more than 2% this week, plunging in all five sessions. What is your view on Nifty going forward?Last week, the benchmark Nifty index traded in a tight range in the first two trading sessions. However, selling pressure has intensified over the past three sessions, leading to a sharp correction. Finally, the index ended the week at the level of 23,767, recording a decline of 2.33%. A sharp rise in Brent crude oil prices amid the escalating conflict between the United States and Iran, coupled with a notable rise in the yield of US 10-year bonds, has weighed heavily on investor confidence in global markets. Amid this sharp deterioration in sentiment, Friday’s price action offered the first sign that the decline could be approaching a crucial juncture.
On Friday, the index found support near the 61.8% Fibonacci retracement level of its recent bullish rally from 23,070 to 24,531 and recorded a slight pullback. Therefore, the index formed a bearish candle with a small lower shadow on the weekly chart, indicating some buying interest at lower levels. Friday’s recovery was largely driven by the strength of the large-cap segment. While Fibonacci support has triggered a pullback, momentum indicators tell a more cautious story beneath the surface.
From a technical perspective, the index is currently trading below its major short- and long-term moving averages, while the 20-day and 50-day EMAs are trending downward, reflecting weakening momentum. The daily RSI is hovering around the 43 mark and remains below its 9-day average, indicating moderate momentum. Meanwhile, the MACD histogram continues to remain below the zero line, further reinforcing the prevailing bearish nuance. As momentum continues to tilt in favor of the bears, the battle now shifts towards a crucial support zone that could determine the index’s next directional move.
Going forward, the 23,650-23,600 area will be an important support zone for the index. A sustained move below 23,600 could extend the correction towards 23,450, followed by the 23,300 level. On the positive side, the 50-day EMA area from 23,950 to 24,000 is likely to pose a significant obstacle.
Difficult week for banking stocks since the index fell by more than 3% this week. How do the charts look for Bank Nifty?The Bank Nifty saw increased volatility during the week. After hitting a high of 58,228, the index came under heavy selling pressure and underwent a significant correction. However, buying interest appeared near the 56,000 level, helping the index stage a strong recovery from lower levels. Despite the rebound, Bank Nifty ended the week around 56,700, registering a loss of over 3%.
The index briefly fell below its crucial 200-day EMA on Friday, indicating weakness in the broader trend. However, it managed to recover and close above this long-term moving average, highlighting the importance of this support zone. Meanwhile, momentum indicators and oscillators are currently reporting a sideways or bounded trend, suggesting a lack of strong directional momentum in the near term.
Looking ahead, the 56,000-55,800 area is expected to act as a key support area as it coincides with the 50% Fibonacci retracement of the previous bull rally. A decisive and sustained break below 55,800 could trigger a new round of selling pressure, paving the way for a sharper correction towards 55,000, followed by 54,400 in the near term.
On the upside, the 20-day EMA area of 57,300 to 57,400 will likely remain a significant resistance hurdle. Any rebound is expected to face supply pressure in this region, and a sustained move above this level would be necessary to improve the near-term technical outlook.
What options data indicates Nifty’s near-term trading range, and where major buy and sell positions develop ahead of monthly expiration?The Put Call Ratio (PCR) fell from 1.13 on July 17 to 0.68 on July 23 as the bears attempted to gain the upper hand. After the sharp decline from the 23,600 levels on July 24, the PCR improved to 0.83. Despite this rally, call option sellers maintained their dominance at the close of the week. Over the past four sessions, a steady rise in open positions alongside falling prices has signaled the accumulation of short positions in index futures.
To recall, Nifty consolidated in the 24,531-23,785 band for 28 sessions and the July 24 close below the lower end of this range confirmed a breakout, raising fears of further declines.
In contrast, the 23,600 strike price results in significant open interest, with put subscriptions nearly eight times higher than calls. This level constitutes a crucial support zone, coinciding with the strong buying seen on July 24 after the Nifty gap closed. Ahead of the monthly expiration, Nifty is very likely to hold this level, although any decisive breakout could trigger the exit of put writers and accelerate the near-term weakness. On the plus side, the 24,000 strike price has notable buying open interest, with call writings nearly three times higher than puts, making it a strong resistance area to watch as expiration approaches.
What actions look good for the coming week?Despite general market weakness, a few stocks continue to show strong relative strength and positive technical setups. HAL, Finance Manappuram, TitanAnd United Minds currently look promising and could remain the center of attention over the coming week. Their resilient price structures and favorable momentum indicators suggest potential for outperformance.
Can you share your views on Bluestone, HDFC Bank, Infosys and IndusInd?Bluestone achieved its strongest weekly close on record, rising nearly 29% following its quarterly results. The stock is now trading comfortably above key short- and long-term moving averages, with a rising ADX signaling robust trend strength. The expanding green histogram bars of the MACD further strengthen the bullish momentum. Although a healthy profit-taking phase cannot be ruled out as the RSI and ADX approach peak levels, immediate support lies in the Rs 710-700 zone. The bullish bias should persist as long as the stock remains above this zone.
HDFC Bank ended the week with a steep loss of 9%, recording lower closes in all five sessions. The stock is trading well below its major moving averages and has closed below the lower Bollinger Band for four straight days, a sign often associated with strong trends. The RSI has fallen below 40, reflecting increasing bearish momentum. The Rs 725-720 area remains critical support, and a decisive breakout could trigger further weakness.
Infosys slipped more than 5% for the week, closing below its key moving averages. The RSI continues to decline, indicating bearish momentum, while DI has crossed DI+ on the ADX with expanded lines, highlighting strong seller control. The MACD line remains below the zero line on the daily and weekly charts, reinforcing the bearish bias. As long as the stock trades below the Rs 1,075-1,080 zone, weakness is likely to persist.
IndusInd Bank attempted a consolidation breakout on July 21, but failed to sustain higher levels, falling below its 20-day EMA after the quarterly results. The RSI fell sharply from 73 to 52, signaling a loss of bullish momentum, while the MACD line crossing below the signal line indicates downward pressure. Unless the stock reclaims the Rs 1,045-1,050 zone, it is likely to remain under pressure.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
