Weak momentum is likely to continue
Thebroader market selling pressure dragged the benchmark indices below the 25000 level. The Nifty declined by 131.40 points or 0.53 per cent. The BSE Sensex is down by 0.36 per cent. The Midcap-100 and Smallcap-100 indices slipped by 1.85 per cent and 3.51 per cent, respectively. The Nifty and Banknifty are up by 0.95 per cent and 0.44 per cent, respectively. The Media and Realty indices were the worst performers with 5.73 per cent and 4.93 per cent, respectively. The IT and FMCG indices are down by 4.09 per cent and 3.41 per cent, respectively. The India VIX is still at the lower band at 11.28. The FIIs sold Rs30,508.66 crore, and the DIIs bought Rs.39,825.97 crore worth of equities.
The benchmark index continued to fall for the fourth consecutive week. It declined by 3.36 per cent from the recent high. As expected, the low VIX regime has led to a sharp decline in the benchmark index. The VIX rose by 7.39 per cent to 11.28 last week. Even after the last two days’ surge in the VIX, it remains at the lower band, hinting at further decline.
The Nifty closed below the previous low and 10-week average decisively. It declined by 0.90 per cent with higher volume in the past four weeks, which is a real caution for the bulls. Now, the index is 0.87 per cent below the 50 DMA. After oscillating around the 50-day moving average (DMA) for the last six days, it finally decisively broke it. It also broke the 50 EMA support. The nearest support is at the 23.6 per cent retracement level of the prior 12-week rally from 21743 to 25669, which is at 24743, which is just a hundred points away.
The index is showing signs of ending its 12-week rally from April 2025 lows. It retraced 86 per cent of the Oct-April decline. It rose by 18.05 per cent from the April lows. Last week’s decline with higher volume indicates a strong distribution.
Last week’s shooting star candle further confirms the distribution. In any case, the index fails to hold the 24742-545 zone of support, except that the decline will be prolonged to another three to four months and may test the 23243 level, or it may fill the gap areas from April 8. For an upside, it must form at least three higher high candles.
The daily Bollinger bands are decisively in the downtrend. The MACD line is below the zero line. The RSI is at a crucial 40 support level. The 100EMA support is at 24576. The nearest major low is at 24473. If these supports are also breached, the market will enter into a decisive downtrend. On the upside, there are several resistance points. First, it must close above the prior day’s high and the 10-week average. As the earnings season is disappointing, there are no leading stocks or sectors; the weakness may continue for some more time. As the fall is severe in the last two days, expect a technical bounce next week. It may attempt to recover from an oversold condition on a lower time frame.
(The author is partner, Wealocity Analytics, Sebi-registered research analyst, chief mentor, Indus School of Technical Analysis, financial journalist, technical analyst and trainer)
