A sell-off in technology and semiconductor stocks across Asia weighed on Indian equities on Tuesday, pushing the Nifty 50 to its steepest one-day decline since May 29 and erasing gains from the previous five sessions.
The benchmark index fell 1.16% to close at a seven-day low after weakness in South Korean markets triggered a broader risk-off mood. Pressure from the weekly derivatives expiry added to the decline.
The move reflected growing concerns that the rally in artificial intelligence-linked stocks may have run ahead of fundamentals. Heavy selling in South Korean chipmakers led investors across markets to cut exposure to risk assets.
South Korean Chip Stocks Trigger Broader Market Weakness
Indian equities opened lower and traded in a narrow range through the early part of the session. Sentiment deteriorated after South Korean stocks came under pressure from profit-taking in semiconductor counters.
The Kospi fell as much as 10%, marking its sharpest decline in more than three months. SK Hynix dropped more than 11%, while Samsung Electronics lost over 8%. Trading on the Korea Exchange was halted for 20 minutes after circuit breakers were triggered.
The market reaction echoed the old saying that global markets often move in tandem during periods of stress. In the current environment, developments in AI-related stocks are increasingly influencing sentiment beyond their home markets.
Nifty Breaks Below Key Short-Term Averages
Tuesday's decline resulted in a bearish candlestick pattern and resolved the indecision seen in the previous session's Doji-like formation in favour of sellers. The Nifty closed below both its eight-day exponential moving average and 50-day moving average on higher volumes than the previous session.
With the index giving up gains accumulated over the previous five trading sessions and slipping below key short-term averages, the near-term market structure has weakened.
Support Zone Emerges Between 23,645 And 23,818
The June 15 opening gap between 23,645 and 23,818 is expected to serve as an important support area in Wednesday's trade. The 20-day moving average is also positioned near this range, increasing its significance.
The Nifty has retraced nearly 38.2% of its recent advance, placing the ongoing correction at a key technical level.
Momentum Indicators Signal Further Weakness
Market momentum has softened in recent sessions. The 14-period Relative Strength Index has slipped below 52, while the MACD histogram indicates a reduction in bullish momentum.
On the hourly chart, the index remains below its moving average ribbon and the MACD line has fallen beneath the zero mark, both of which point to short-term weakness.
Metal, information technology and banking stocks accounted for much of Tuesday's decline. For momentum to improve, the Nifty would need to close above the 24,000-24,090 range. Until then, the 50-day moving average near 23,848 and the eight-day exponential moving average near 23,889 could act as resistance levels.
Stock To Watch: Tata Technologies
Tata Technologies remains in focus after recovering from its March 30 low. The stock has gained nearly 54% from that level and reached a high of Rs 784 before facing profit-taking. It later found support near its rising 20-day moving average.
The stock formed a long-legged Doji-like pattern near the 20-day moving average and subsequently registered a bullish candle with a higher high and higher low. Despite Tuesday's broader market weakness, Tata Technologies maintained its higher-high, higher-low structure.
The current chart pattern resembles a pennant formation, indicating consolidation following a sharp advance. The stock also continues to trade above its 20-day, 50-day, 100-day and 200-day moving averages.
Momentum indicators have strengthened. The 14-period Relative Strength Index has moved above 60, while the positive Directional Movement Index has rebounded from around the 25 level. The Average Directional Index remains above 42, indicating trend strength.
As long as the stock remains above the Rs 767-Rs 770 zone, the structure remains intact. On the upside, Tata Technologies could test the Rs 805-Rs 820 range over the medium term, while Rs 738 remains the stop-loss level.
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