The Indian stock market traded lower on Monday, with the benchmark indices, Sensex and Nifty 50, resuming their downward trajectory amid cautiousness over the elevated crude oil prices and escalating US-Iran war in the Middle East.
The BSE Sensex was down over 300 points to trade around 76,200 level, while the NSE Nifty 50 declined 0.4% to slip below 23,800 level. The Bank Nifty index also traded over half a percent lower at 57,000 level.
Barring for Nifty Pharma, all the other sectoral indices were trading in the red, with the Nifty IT and Nifty Media slumping over 2% each, followed by Nifty Metals, Nifty PSU Bank, Nifty FMCG and Nifty Realty indices falling over 1% each.
Nifty 50 index has declined 100 points from day's high and slipped below 23,800 level. The index has declined in seven out of the previous nine trading sessions.
Additionally, the benchmark Nifty 50 has tanked around 1,000 points in the last 25 trading sessions, wherein the index has ended lower in 17 sessions.
“The market has been drifting down for four weeks now. A relevant question is: why this downtrend despite positive fundamental news regarding the economy and corporate earnings. One explanation is that worsening tensions in the Middle East and the consequent elevated crude prices are weighing on the market,” said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.
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Moreover, the ongoing IPO boom and the spate of big IPOs expected to hit the market this month is also impacting the secondary market. There are eleven mainboard IPOs hitting the market this week. The mega NSE IPO and Jio Platforms IPO also are expected this month.
“These mega IPOs are expected to absorb humongous liquidity from the market. Investors are looking for listing gains from these IPOs. In brief, the present focus is on the IPO market rather than the secondary market. This is likely to continue throughout September,” said Vijayakumar.
On the global front, the better-than-expected jobs data in the US has raised the prospects of an interest rate hike by the US Federal Reserve in September.
“This also will weigh on equity and bond markets globally,” Vijayakumar added.
Technical Outlook
Last week, the benchmark Nifty 50 index extended its losing streak for the fourth consecutive week. During the previous week, the index broke down from its rising channel on the daily chart, signaling a shift in the short-term trend.
“The technical picture provides little evidence of a sustained recovery at this stage. Nifty is comfortably trading below its short and long-term moving averages, while the 20, 50, and 100-day EMAs have started edging lower, indicating increasing bearish pressure,” said Sudeep Shah - Head of Technical and Derivatives Research at SBI Securities.
The daily RSI is hovering around 40 and remains below its 9-day average, while the daily ADX has moved above 20 and is rising, suggesting that the prevailing trend is gaining strength. With momentum and trend indicators weakening, the spotlight now shifts to a crucial support zone, he added.
According to him, the support zone for Nifty 50 lies in the 23,720 – 23,700 region. The zone is important as the 61.8% Fibonacci retracement of the previous upmove from 23,070 to 24,774 is placed around this region. He believes a sustained break below 23,700 could intensify the correction towards 23,500, followed by 23,300.
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“On the upside, the hurdle is placed in the zone of 24,150 – 24,200 as it is the confluence of 50 and 100-day EMA levels. A sustained move above this range would be required to ease the prevailing bearish bias and bring stability back to the Nifty 50 index,” said Shah.
Hitesh Tailor, Technical Research Analyst at Choice Broking noted that the weakness in the market has become more pronounced after the Nifty 50 index broke below its rising trendline support on the daily chart, and it is now trading below all the key daily EMAs, indicating a clear deterioration in the short-term trend. The index has faced rejections from the 200-Day EMA, highlighting the lack of sustained buying interest.
“Apart from the technical weakness, renewed US-Iran geopolitical tensions, elevated crude oil prices and uncertainty around the global interest-rate outlook are keeping investors cautious and weighing on overall risk appetite. On the domestic front, FMCG and Auto have seen relatively stronger profit booking during this correction,” said Tailor.
Going ahead, he believes the 23,800 – 23,750 zone remains an important support area, and if Nifty 50 manages to hold this area, some short-covering or a technical bounce cannot be ruled out, but a decisive break below it could extend the correction towards 23,500 – 23,450.
“On the upside, 24,000 – 24,050 is the immediate hurdle. Unless the Nifty 50 index starts sustaining above these levels, the overall bias remains cautious, and rallies are likely to face selling pressure,” said Tailor.
Shitij Gandhi, AVP - Equity Technical Research, SMC Global Securities said that the Nifty 50 index is now approaching a crucial support band around 23,750 – 23,700 zone, which could determine the next leg of the move.
“A sustained hold above this zone may trigger a relief rebound towards 24,000 – 24,050, followed by the stronger resistance area of 24,150 – 24,200. However, a decisive break down below 23,700 could intensify selling pressure and drag Nifty towards 23,500 which could emerge as the next major downside support,” said Gandhi.
He advises traders to closely track price action around these levels, as a recovery above 24,200 would be required to signal meaningful improvement in the near-term structure.
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