TheDalal Street’s benchmark indices continue to fall for the fifth consecutive week and closed below the crucial levels. The Nifty declined by 271.65 points or 1.09 per cent. The BSE Sensex is down by 1.06 per cent. The broader market indices extended their underperformance. The Nifty Midcap-100 and Smallcap-100 indices are down by 2.37 per cent and 3.42 per cent, respectively. On the sectoral front, the FMCG was the only sector to buck the trend, ending with a gain of 2.96 per cent. The Nifty Realty declined by 5.73 per cent. The Metal slipped by 3.42 per cent. Media and Pharma indices declined 3.16 per cent and 2.73 per cent, respectively. The India VIX rose by 6.21 per cent to 11.98. The Market breadth is mostly negative during the week.

The Nifty registered its lowest close after 13th May. Now, the fall is five weeks old. The index faced resistance at 61.8 per cent twice and sharply. All the recovery efforts failed during the last five weeks. It faced stiff resistance at the 25230-255 zone at least five times. Now, the Nifty is approaching the consolidation zone support area, which is at 24556-494. In any case, if there is a violation of this zone, the immediate support is at 24378, which is the 12th May gap area support. The index must hold this zone of support; otherwise, expect a big correction. Any bounce from this zone will test the 25100-250 zone of resistance again. In this scenario, the price pattern could be the head and shoulders. The head and shoulder breakdown target is open to 23310. It is also a 61.8 per cent retracement level of the prior uptrend swing from the low of 21743 to 25669.

The alternate possibility is that, if the head and shoulders pattern breakout is avoided, the index may bounce from 24490 and retest the prior high of 25116. In any case, this technical bounce sustains above the 25116-255 zone of resistance. Expect that the correction is ended, and the new rally will start, potentially testing levels above 25669. The probability of this scenario in the current situation is very thin.

The last three weeks of decline with a little higher volume signal the strong distribution. The index closed below the Anchored VWAP, which is anchored at the major low of 21743. It is also decisively below the 23.6 per cent retracement level. It has sustained below the 10-week average for the last three weeks. The 20-week average is at 24446, and the 50-week average is at 24212. The 200EMA is at 24180, which is at the lower band of the 12th May gap area. These averages will also act as strong support on the downside.

As the geopolitical conditions, such as the cold war between the US and Russia, and the highest tariffs on our country, will dampen market sentiments. On Friday, the Dow and S&P are down by over 1.2 per cent, and formed strong bearish patterns. The Dow Jones index closed at a five-week low. It faced resistance at the 45000 zone multiple times and failed to make a new lifetime high. The Dollar index, DXY, tested the 100 last week, which has an inverse relationship with equities.

The weekly RSI (51.79) remains in the neutral zone, but the daily RSI (36.01) declined into the bearish zone. The daily MACD is decisively below the zero line, and the weekly MACD is about to give a fresh sell signal. The Bollinger bands are in the downtrend, and the 50 DMA is flattened.

The evidence shows that the momentum on the downside is gaining.

As the index nears the crucial support zone, stay with a cautious stance. The index may open with a gap down, but the chances of recovering from the support zone are high. It is advised to take aggressive positions. Any bounce from the 24490 zone will give some good buying opportunities next week.