Gift Nifty tanks 378 points, signals gap-down opening: Nifty, Nifty Bank levels to watch

Indian headline indices are headed for another gap-down opening on Monday after a sharp fall in the previous trading session on Friday. Nifty futures on the Nifty International Exchange or Gif Nifty traded 378 points, or 1.53 per cent, lower at 24,337, hinting at a negative beginning for the new week. Traders were hooked to the edges amid a slew of negative global and domestic cues.
 

Majority of the market participants believe that sharp sell-off in the Asia-Pacific markets, weak economic signals, rising fears of recessing the US economy, escalating geopolitical concerns of war in the Middle-East, fears of FPI outflows and rich valuations of the Indian equities may dent the sentiments at the Dalal Street.
 

Economic growth is showing signs of weakness, compounded by escalating trade tensions, conflicts in the Middle East, and persistently high inflation. The BOJ has resorted to a rate hike, impacting the Japanese market while the US Fed is contemplating a rate cut in September due to weak jobs data, said Vinod Nair, Head of Research, Geojit Financial Services.
 

"Going forward, the chances of further consolidation seem elevated due to premium valuations, weak Q1 results, and ongoing global market consolidation. The RBI policy meeting next week could provide some hints towards an outlook on rates, while expectations are to maintain the status quo as of now," he said.
 

On Friday, BSE Sensex plunged 885.60 points, or 1.08 per cent, to end at 80,981.95, while NSE's Nifty50 crashed 293.20 points, or 1.17 per cent, to close at 24,717.70 for the day. BSE midcap index crashed more than a per cent, while the BSE smallcap index shed half a per cent. Fear gauge India VIX spiked more than 11 per cent to settle at 14.32 for the day.
 

Global markets witnessed selling pressure after US Manufacturing PMI data showed contraction and a rise in initial jobless claims to an 11-month high, sparking concerns of a slowdown in the US, said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services.
 

"Additionally, weak earnings outlooks from a few large tech companies have contributed to the negative sentiment. Domestic equities too witnessed a sell-off after achieving historical milestones. Nifty is expected to sustain its positive momentum next week as the overall market trends remain strong," he said.
 

Nifty50 index

Nifty ended Friday’s session on a somber note, following a sharp sell-off from the coveted Nifty 25000 mark, leaving investors pondering if this signals the beginning of a downturn. Two negative factors prevail: a lack of significant positive surprises in Q1 June earnings from Corporate India and overbought technical conditions, said Prashanth Tapse, Senior VP (Research), Mehta Equities.
 

"Despite talks of a potential double-rate cut in September, bearish sentiments persist, with Fed-funds futures indicating a 71.5 per cent probability of a 50-basis point cut at the FOMC’s September meeting. Anxiety remains high, especially after Friday's unexpectedly weak July jobs report, suggesting that volatility will be the hallmark of the day," he said.

A reasonable negative candle was formed on the daily charts, Technically this market action is indicating a short-term top reversal pattern for the Nifty at the new high of 25,078 levels. The unfilled opening down gap could be considered as a bearish breakaway gap, which is normally formed at the crucial top reversal patterns. This is a negative indication, said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.
 

"The short-term trend of Nifty is down, but the near-term uptrend status of the market is intact. There is a possibility of some more weakness in the coming sessions down to 24,600-24,500 levels before showing any upside bounce from the lows. Immediate resistance is at 24,900 levels," Shetti said.
 

The Nifty index continues to maintain a position above all its major EMAs, with robust nearby support identified around the subzone of 24,600-24,500. Also, till Nifty remains above this level, there shouldn't be any significant cause for concern for market participants, said Osho Krishan, Senior Analyst - Technical & Derivatives, Angel One.
 

"On the higher end, the bearish gap on the daily chart, around 24,850-24,950, is likely to act as intermediate resistance, followed by the psychological mark of 25,000 in the near period. Moreover, a sustained breakthrough beyond this level is anticipated to catalyse the next series of rallies in the benchmark," he added.
 

A negative divergence was identified on the daily timeframe of Nifty50 on the 14-period RSI. A negative divergence occurs when the price makes a higher high while the RSI forms a lower high. This suggests that traders should avoid building overleveraged positions and chasing prices. Instead, adopting a buy-on-dips approach is advisable, said SBI Securities.
 

"Talking about levels, the zone of 24,580-24,540 will act as strong support for the index as it is the confluence of the 20-day EMA level and the 50 percent Fibonacci retracement level of its prior upward rally. If the index slips below the level of 24540, then the next support is placed in the 24350 zone. While, on the upside, the resistance has shifted lower in the zone of 24900-24950 level," it said.
 

Nifty Bank

Nifty Bank managed to stay above the 51,000 level, which is positive and can help the index to move towards 52,000 in the near future. A close below 51,000 may lead to further weakness, and in that case, it can fall towards 50,500 or 50,200 levels, said Amol Athawale, VP-Technical Research, Kotak securities.
 

Bank Nifty consolidated around the 40 day moving average. It has been underperforming and can continue to do so. The Nifty Bank has formed an Inside Bar pattern and thus making the extremes 52,550 – 50,440 crucial levels to watch out for over the next few trading sessions. A range breakout shall decide the further trend hereon, said Jatin Gedia, Technical Research Analyst at Sharekhan.

 

 

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