As Indian stock market benchmark indices Sensex and Nifty50 closed in the red for the third consecutive session, technical analysts expect the bearish momentum to strengthen further with 23,300 zone could act as a crucial support area for the next trading session.
This comes as GIFT Nifty trades 0.18% lower at 23,449, indicating a possible negative start to the domestic benchmark equities as all US indices were trading lower on Wednesday as oil prices crossed $100 amid US-Iran tensions. Dow Jones last declined 0.71% to 52,413, S&P 500 stayed 0.58% down at 7,630.68, while Nasdaq fell 0.72% at 26,231.46.
According to Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities, "From a technical perspective, Nifty continues to trade below its 20-day and 50-day EMAs, keeping the overall structure weak. The daily RSI has slipped below the 40 zone, indicating strengthening bearish momentum, while the MACD continues to remain in negative territory, sustaining the bearish bias. Meanwhile, the rising ADX indicates increasing trend strength, suggesting that selling pressure could remain elevated in the near term."
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In terms of outlook, Shah, "Going forward, the 23330–23300 zone could act as a crucial support area. A sustained move below 23300 could accelerate the decline towards 23170–23150 levels. On the upside, 23620–23640 is expected to act as an immediate hurdle, coinciding with today's gap-down zone. A sustained move above 23640 could trigger a short-term pullback towards 23800 levels."
On Wednesday, the Nifty 50 ended 0.86%, or 203.60 points, lower at 23,431.50, while the BSE Sensex closed 1.08%, or 813.35 points, lower at 74,764.23 levels. Except Nifty Metal and Oil and Gas indices, all sectors ended in the red. Nifty IT was the top drag, down over 3%.
Meanwhile, Asian markets ended mixed on Wednesday, with South Korea's KOSPI leading gains, rising 1.4%, while Shanghai Composite and Shenzhen Composite gained 0.28% and 0.15%, respectively. Taiwan's Taiex advanced 0.16%, while New Zealand's NZX 50 rose 0.19%. Japan's Nikkei fell 0.19%, Hong Kong's Hang Seng declined 0.17% and Australia's S&P/ASX 200 slipped 0.11%.
Highlighting bearish momentum, Nandish Shah, Deputy Vice President at HDFC Securities said, "The index decisively breached the 23,478 support and closed on a markedly weak note, underscoring the persistence of the downtrend. With lower tops and lower bottoms continuing to form, Nifty remains firmly below key moving averages, keeping the broader structure bearish."
On next technical levels, Shah noted, "The next major support is now seen at 23,172, which coincides with the 61.8% Fibonacci retracement of the entire up move from the April low of 22,182 to the August high of 24,772. On the upside, immediate resistance has shifted down to 23,600, followed by 23,800.
Bank Nifty Outlook
Bank Nifty also traded under pressurre and attempted to recover from lower levels; however, the pullback was short-lived as selling, falling in line with broader market weakness.
According to Sudeep Shah, "With four consecutive sessions of negative closing, the near-term stance remains bearish. The daily RSI has slipped below 40, while the index continues to trade below its 20-day and 50-day EMAs, with MACD remaining below the zero line."
He added, "Going forward, the 55900–55800 zone could act as a crucial support area. A sustained breach below 55800 could pave the way towards 55400 levels. On the upside, the 56800–56900 zone is likely to act as an immediate hurdle, while a sustained move above 56900 could extend the pullback towards 57300 levels."
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