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The Indian stock market experienced a significant downturn, with the Nifty falling below its 50-week Exponential Moving Average (EMA) for the third consecutive week, signaling a sustained bearish trend. This decline, compounded by a nearly 6 percent drop in February, marks the index's longest losing streak since November 1996. The broader market suffered even more acutely, with the Nifty Midcap 100 and Nifty Small Cap 100 indices plummeting 10.79 and 13.07 percent, respectively, representing the sharpest monthly correction since the COVID-19 pandemic. Analyst Sudeep Shah of SBI Securities provides insights into the market's current state, highlighting crucial support and resistance levels for both the Nifty and Bank Nifty indices. The analysis delves into the technical aspects of the market, examining momentum indicators, rollover data, and moving averages to offer a comprehensive outlook for the upcoming week. The persistent weakness, coupled with strong rollovers in Nifty futures, suggests that bearish sentiment remains dominant, with traders carrying forward short positions. This cautious outlook underscores the market's struggle to find a firm footing amid persistent selling pressure. The relative strength of the Bank Nifty compared to the frontline indices is also noted, although the banking benchmark index is still trading below both its short and long-term moving averages, indicating underlying weakness. The analysis also identifies potential outperforming and underperforming sectors based on rollover data, providing valuable information for investors seeking to navigate the current market volatility. The sharp correction in the Nifty Midcap and Nifty Small Cap 100 indices raises concerns about the broader market's health, with both indices slipping below their 100-week EMA levels. The analysis highlights crucial support and resistance levels for these indices, offering guidance for investors seeking to assess the potential for further declines or a possible rebound. Finally, the article addresses the intense selling pressure experienced by stocks like Polycab and KEI Industries, attributing it to UltraTech Cement's entry into the wires and cables industry. The analysis recommends avoiding these stocks for now, given their strong downtrend and bearish momentum.
The technical analysis of Nifty reveals a concerning picture. The fact that the index has decisively broken below its 50-week EMA for the third straight week is a strong bearish signal, suggesting that the downward trend is likely to continue in the near term. The decline of both the 20 and 50-week EMAs further reinforces this bearish sentiment. While the slowing upward slope of the 100 and 200-week EMAs indicates diminishing long-term strength, the immediate concern is the short-term trend, which is clearly negative. The Relative Strength Index (RSI) hovering around 22 suggests that the index is approaching oversold territory, which could lead to a temporary pause in selling pressure. However, this pause needs to be confirmed by price action, meaning that the index needs to show signs of strength and reversal before any meaningful recovery can be expected. The crucial support zone of 22,000-21,900, representing the confluence of the 100-week EMA and the 32.8 percent Fibonacci retracement level, will be a key area to watch. If the index breaks below this level, the next crucial support is placed at 21,600, indicating the potential for further downside. On the upside, the zone of 22,650-22,700 will act as a significant hurdle for the index, representing a level that needs to be breached for any sustained recovery to occur. The fact that Nifty futures have ended in the red for the fifth consecutive series, marking the longest losing streak in recent history, further underscores the bearish sentiment. The elevated rollover of 83.57%, surpassing both last month's and the three-month average, suggests that traders are carrying forward short positions, indicating a cautious outlook for the upcoming series.
Bank Nifty's relative outperformance compared to Nifty is noteworthy, but it does not necessarily indicate a strong bullish trend. While the banking index has declined less than Nifty from its all-time high, it is still trading below both its short and long-term moving averages, which are trending downward. This suggests that the underlying weakness persists, and any outperformance may be temporary. The daily RSI remaining in a sideways zone indicates a phase of consolidation rather than outright bearishness, but a decisive move in either direction could set the tone for the coming sessions. The crucial support zone of 47,700-47,500, representing the prior swing low and the 100-week EMA, will be a key area to watch. On the upside, the zone of 48,800-48,900 will act as an immediate hurdle for the index. The identification of potential outperforming and underperforming sectors based on rollover data provides valuable insights for investors. The potential outperformance of Private Banks, Financial Services, and Metal sectors suggests that these sectors may be relatively more resilient in the current market environment. Conversely, the potential underperformance of Automobile, FMCG, IT, Pharma, Healthcare, Oil & Gas, PSU Banks, PSE, and Realty sectors indicates that these sectors may be more vulnerable to further declines. The steepest correction in the Nifty Midcap and Nifty Small Cap 100 indices since the COVID-19 fall is a significant concern. The fact that both indices have formed sizeable bearish candles on a monthly scale suggests that the downward trend is likely to continue. The Nifty Midcap 100 index slipping below its 100-week EMA level for the first time after August 2020 is a particularly worrying sign. For the Nifty Midcap 100, the zone of 47,200-47,000 will act as immediate support, while the zone of 48,800-48,900 will act as a crucial hurdle. For the Nifty Small Cap 100, the 14,200-14,100 will act as crucial support, while the zone of 15,100-15,200 will act as a crucial hurdle.
The sharp decline in Polycab and KEI Industries stocks following UltraTech Cement's announcement of its entry into the wires and cables industry highlights the vulnerability of these stocks to competitive pressures. The fact that both stocks are in a strong downtrend, trading below their short and long-term moving averages, and that momentum indicators and oscillators are suggesting strong bearish momentum, further reinforces the recommendation to avoid these stocks for now. In summary, the Indian stock market is currently facing significant challenges, with bearish sentiment dominating the overall trend. While there may be temporary pauses in selling pressure or periods of consolidation, the underlying weakness persists. Investors should exercise caution and carefully assess the risks before making any investment decisions. The analysis provided by Sudeep Shah of SBI Securities offers valuable insights into the market's current state and potential future direction, helping investors navigate the current volatility and make informed decisions. It's crucial to remember that market analysis is not a guarantee of future performance, and investors should always conduct their own research and seek professional advice before making any investment decisions.