(Bloomberg) -- The slump in India's 50-member Nifty index on Tuesday sent the markets below a key support level, activating a chart formation that could trigger more losses.
The benchmark dropped 1.5% to 21,238.80, reversing early-session gains of 0.8%. Prices broke below a line of support, confirming a bearish “head-and-shoulders” top pointing to a further drop of ~4% to just below 20,500. More significantly, this level lies in the area of a bullish runaway gap that opened in early December after the BJP government won three crucial state elections.
“The inability of the Nifty to decisively reclaim the 20-day average was a big red flag,” said Jai Bala, chief market technician at Cashthechaos.com. The Nifty is expected to probe key support near 20,500 with bulls regaining the upper hand only above 21,800, he added.
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