The only positive, if one could call that, is the bulls managed to defend the recent swing low of 24,462, which the index had last hit on May 22, by reversing from its intraday low of 22,472 on Friday. The 250-point recovery from the lows of the day meant that the losses were not as bad as feared, but do bring up a question that for how long will that sustain, considering the deteriorating scenario in West Asia.
While India has no direct involvement in the conflict, the indirect impact is what spooked the street on Friday. At one point, Brent Crude futures were up as much as 13% and nearing the mark of $80 per barrel, within days of languishing around the $60 per barrel mark. Rising oil prices are a negative for the Indian economy as it adds to the import bill, increases inflation and may end up nullifying all the bazooka steps taken by the Reserve Bank of India, only last week.
Of course, there is still plenty of time before markets open for trading on Monday and ongoing conflict may get called off during the course of the day, but the situation currently remains fluid and on the path of deterioration.
Friday’s actions had their impact on Wall Street too, as the Dow Jones ended with losses of over 700 points. Just as the indices were within touching distance of reclaiming their record high levels, the conflict has dampened sentiment yet again, leading to a rally in bonds and haven buying in Gold.
Another reason behind the Nifty correction has been the underperformance of the Nifty Bank, which has now declined for four days in a row. From its record high levels of 57,049, the Nifty Bank has corrected over 1,500 points in the last four trading sessions and has in fact given up all the gains it had made since the RBI policy announcement on June 6.
The bulls would first look to continue defending the May 22 swing low and the recent developments have put the Nifty back in that 24,500 – 25,200 range which has failed to breakout of, despite the Nifty Bank hitting new highs in the process. The Nifty Bank too is at crucial levels of 55,500 and will look to continue defending those and that of 55,000 on the downside.
The Nifty continues to remain in a range, but the 24,450 level continues to provide a strong support to the index, said Rajesh Bhosale of Angel One, who added that the 24,400 – 24,450 level continues to be a key support zone along with the 50-Day Moving Average. On the upside, filling the gap between 24,825 and reclaiming 25,000 will be key for the bulls. “We maintain a cautious stance and advise a wait-and-watch approach,” Bhosale said.
Vaishali Parekh of Prabhudas Lilladher also advises a wait-and-watch approach for further developments and 24,000 being a key support level on the downside for the overall trend to remain intact. For the bias to improve on the upside, the Nifty has to decisively breach the 25,000 mark.
HDFC Securities’ Nandish Shah also maintained that the 24,462 level is an important one for the Nifty, as a break below that could intensify the selling pressure towards the next support at 24,164. On the upside, short-term resistance is seen at 24,847 and 24,936.
The Nifty Bank is approaching its immediate support of 55,000, which is also a key psychological level and a break below that could open further downside risk, according to Om Mehra of SAMCO Securities. 56,000 is a key level of resistance on the upside and only a sustained close above that can reignite the bullish momentum.
