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The Indian stock market, specifically the Nifty 50 index, experienced a significant downturn, erasing all Friday's gains within two sessions. This sharp decline, exceeding 300 points by December 17th, reflects a cautious market sentiment preceding the highly anticipated Federal Open Market Committee (FOMC) meeting scheduled for December 17th-18th. The index's breach of short- and medium-term moving averages underscores the severity of the sell-off. Key support levels are now identified at 24,200 (Friday's low) and 24,000 (December's low). Experts highlight the 24,700-24,800 range as a critical resistance level on the upside. The daily chart reveals a long bearish candlestick pattern, confirming the lack of strength in a potential upward bounce. While a positive chart pattern of higher tops and bottoms remains intact according to HDFC Securities' Nagaraj Shetti, the 24,200-24,000 support is paramount. Holding above these levels might trigger a substantial upside recovery, while failure to do so will likely intensify selling pressure. Immediate resistance is placed at 24,500.
Derivative data offers further insight into market sentiment. The maximum Call open interest is concentrated at the 25,000 strike price, followed by 25,500 and 24,700. Maximum Call writing, indicative of bearish bets, is observed at 24,500, followed by 24,400 and 24,600. On the Put side, maximum open interest rests at 23,900, followed by 24,000 and 23,500, with maximum Put writing at 23,900, followed by 24,350 and 23,700. This data, combined with weekly options data pointing to 24,000 as support and 24,700 as resistance, reinforces the crucial nature of the 24,000-24,200 support band for the Nifty 50. The convergence of technical analysis and options data strongly suggests a high-stakes period for the index.
The Bank Nifty, mirroring the Nifty's weakness, faced considerable pressure, plummeting 747 points (1.39 percent) to close at 52,835. This decline is marked by a long red candle on the daily charts, illustrating widespread selling among banking heavyweights. While the index dipped below the 10-day Exponential Moving Average (EMA) at 53,149, it managed to defend the 20-day EMA at 52,757, offering a slightly positive signal. The Bank Nifty remains confined within a broader range of 52,500 to 53,750, exhibiting volatile swings. According to Chandan Taparia, Senior Vice President and Head of Technical Research and Derivatives at Motilal Oswal Financial Services, as long as the index stays below 53,000, further weakness could push it towards 52,500, followed by 52,250. Conversely, the upside hurdle is set at 53,000, with further resistance at 53,250. This range-bound behavior highlights the uncertainty and indecisiveness in the market.
The heightened volatility leading up to the Federal Reserve's meeting significantly impacted investor sentiment. The India VIX, a measure of market volatility, spiked by 3.32 percent to 14.49, following a previous session's surge of 7.41 percent. This escalation of uncertainty, coinciding with the year's final FOMC meeting, further dampened bullish sentiment and contributed to the overall negative market trend. The anticipation of potential policy changes from the Federal Reserve has created significant nervousness among investors, further exacerbating the downward pressure on both the Nifty and Bank Nifty indices. The market anxiously awaits the FOMC's decisions and their potential impact on global and Indian financial markets. The coming days will be crucial in determining whether the market can rebound from these support levels or succumb to further downward pressure. Investors should closely monitor these key levels and consider diversifying their portfolios to mitigate potential risks.