The Nifty 50 posted its steepest single-day decline since May 12 on Friday as MSCI index rebalancing triggered heavy portfolio adjustments and pushed the benchmark below key technical levels.
The index fell 1.5% to close at 23,547.75 after briefly testing the 24,000 mark earlier in the session. Selling pressure intensified through the day and accelerated in the final hours of trade as passive funds and exchange-traded funds adjusted holdings following the MSCI rebalancing exercise.
The sharp fall left the Nifty below both its 20-day and 50-day moving averages, weakening its near-term technical structure. The benchmark also ended May down 1.87%, marking its worst May performance since 2022, when it declined more than 3%.
MSCI Rebalancing Drives Activity
Friday's session recorded the highest daily trading range in nearly two months and the strongest volumes in almost two years. The spike in activity coincided with MSCI index changes, which led to large-scale portfolio adjustments by passive investment vehicles.
Foreign institutional investors sold more than Rs 21,000 crore in a single session, the highest one-day outflow recorded so far in 2026. While the figure points to aggressive selling, a significant part of the activity stemmed from technical adjustments linked to the MSCI reshuffle.
The session's price action formed a bearish candle, reflecting sustained selling pressure throughout the day.
Key Levels In Focus
The Nifty had held above its 150-week support level for the past three weeks. That support, currently placed near 23,419, now becomes a key level for traders.
Another technical concern is the downward slope of the 200-day moving average. Until the long-term average stabilises or turns higher, the broader market structure may remain under pressure.
The decline has also lowered resistance levels. The 20-day and 50-day moving averages, located near 23,831 and 23,683 respectively, may now act as immediate resistance. The 24,000-24,100 zone remains the main hurdle for any recovery.
As long as the index trades below that range, consolidation may continue with a negative bias.
Support Zone Remains Critical
Friday's low of 23,484 is the first support level to watch. A break below that level could lead to a retest of the recent swing low near 23,262.
The current setup also resembles a bearish flag formation. While not a textbook pattern, the broader structure points to weakness. A decisive break below the 23,262-23,484 support zone could increase downside pressure.
Seasonal trends offer some support to the outlook. Since 2020, June has produced only one negative monthly close for the Nifty. The index has also delivered gains in each of the past three Junes, including a 6.57% rise in June 2024.
However, historical trends alone may not be enough to offset the current technical weakness. Price action is likely to remain the primary indicator for market direction.
June 1 Outlook
The Nifty enters Monday's session with resistance placed between 23,683 and 24,100, while support lies between 23,262 and 23,484.
A sustained move above the resistance band could ease pressure and improve sentiment. Conversely, a decisive break below support could trigger a deeper near-term decline.
Until either range gives way, the index is likely to remain volatile and under pressure while trading below 24,000-24,100.
Stock To Watch: Thangamayil Jewellery
Thangamayil Jewellery is approaching a breakout from a falling trendline resistance within a broader rising channel that has been in place since the start of the year.
A sustained move above the Rs 4,220-4,230 zone could confirm the breakout. The stock is trading above its 20-day, 50-day, 100-day and 200-day moving averages, with all four averages aligned higher.
Trading volumes also increased on Friday, with more than 3.3 lakh shares changing hands on the NSE, exceeding both the 10-day and 30-day average volumes.
Momentum indicators support the setup. The 14-day Relative Strength Index moved above 60 after finding support near its nine-period average. The Moving Average Convergence Divergence indicator showed a bullish crossover, while Bollinger Bands began widening.
A sustained move above Rs 4,220-4,230 could lead to a rise towards Rs 4,430-4,550. A stop loss may be placed near Rs 3,990.
Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this artice.
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