Indian stock markets are expected to start today’s session negatively, with trends from the Gift Nifty indicating a 50-point discount from the Nifty futures’ previous close. The Nifty 50 and Sensex will likely open lower, following mixed global market cues amid heightened geopolitical tensions.
On October 3, the domestic equity market suffered a sharp fall, with both indices witnessing a steep drop of over 2%. The Nifty 50 closed 546.80 points lower, settling at 25,250.10, while the Sensex dropped 1,769.19 points, closing at 82,497.10. The decline was driven by concerns over the escalating Israel-Iran conflict, which has rattled investors worldwide.
The market sentiment is clearly bearish, with technical analysts pointing towards further downside potential. Investors and traders alike are advised to brace for volatility as uncertainty dominates the markets.
Key Insights from Technical Analysis: Nifty 50 and Bank Nifty
According to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, the Nifty 50 formed a long bear candle on the daily chart, characterized by a long upper shadow. This pattern suggests selling momentum on the downside, which is exacerbated by the market’s inability to fill the downside gap left from the previous session.
Shetti emphasizes that the breakdown of key support levels is significant, with the Nifty 50 closing below the daily 10 and 20-period moving averages.
Additionally, the ascending trend line, which provided support at 25,400, was breached during the October 3 session. This indicates potential weakness ahead as the market looks to test lower support zones.
Technical Support and Resistance Levels:
| Index | Support Levels | Resistance Levels |
|---|---|---|
| Nifty 50 | 25,050 – 25,100 | 25,300 – 25,500 |
| Bank Nifty | 56,000 – 56,500 | 57,800 – 58,100 |
Shetti’s analysis points to potential support around the 25,100 – 25,050 levels, coinciding with the weekly 10-period EMA and the 23.6% Fibonacci retracement. A break below these levels could send the index down to 24,800 in the near term, marking a significant bearish shift.
Momentum Indicators:
- RSI (Relative Strength Index) and other momentum indicators are pointing towards a continued weakness, reinforcing the bearish outlook.
- The Nifty 50 is expected to face strong resistance between 25,300 and 25,500, making any upward movement short-lived unless a major recovery is seen globally.
Expert Predictions: More Downside Expected for Nifty 50
Experts like Dr. Praveen Dwarakanath, Vice President of Hedged.in, echo the bearish sentiment. He highlights that the Nifty 50’s inability to hold its support at 25,300 is a major red flag for bulls.
A dead cat bounce, or a temporary recovery, may occur around the 25,000 level, but it is unlikely to last. The market’s technical setup and global macroeconomic factors suggest that the index could slide further towards 24,800.
Dwarakanath advises traders to be cautious, as any pullback toward 25,450 or 25,500 could be an opportunity for short-sellers to exit long positions and initiate fresh shorts. The market is expected to remain in a sell-on-rise mode for the foreseeable future.
Nifty Open Interest (OI) Data:
The options data for Nifty 50 shows that the highest Call Open Interest (OI) is concentrated at the 26,000 and 27,000 strike levels, indicating strong resistance above 25,500.
On the Put side, the highest OI is at 25,000 and 24,000, further reinforcing the likelihood of the index testing lower support levels.
Bank Nifty Outlook: Pressure Continues
The Bank Nifty index, which has been closely tracking the performance of the Nifty 50, is also showing signs of weakness. The index closed below key support at 57,000, raising concerns of further downside movement.
Technical analysts expect the Bank Nifty to test support levels around 56,000 – 56,500, with resistance expected at 57,800 – 58,100.
With heavyweights like HDFC Bank and ICICI Bank underperforming, the banking sector remains under significant selling pressure. Chandan Taparia, Head of Equity Derivatives and Technicals at Motilal Oswal, notes that Put writing at 24,000 and 25,000 strikes is indicative of traders bracing for more downside in the banking sector.
Strategy for Traders and Investors
Given the current bearish sentiment, analysts recommend that traders adopt a short-term selling strategy and use pullbacks to exit long positions.
Investors, on the other hand, should consider hedging their portfolios with Put options or reducing exposure to riskier assets until the market shows signs of stabilization.
Key Takeaways for Traders:
- Expect more downside pressure on both the Nifty 50 and Bank Nifty indices.
- Immediate support for Nifty is seen around 25,050, with resistance between 25,300 and 25,500.
- Short-term traders should look for pullbacks to initiate fresh short positions.
- Long-term investors should focus on defensive sectors like IT and Pharmaceuticals, which are expected to perform better amidst global uncertainty.
Disclaimer
The information presented is based on current market trends and technical analysis. Readers are advised to conduct their own research or consult a financial advisor before making any investment decisions. Markets are volatile, and past performance is not indicative of future outcomes.
