If the index is unable to sustain above 24,500 levels, technically it can then slip to its 200-DMA placed at 23,365 levels.
The Nifty 50 can fall another 1,000 points from the current levels in the short-to-medium term to 23,300 levels, technical charts suggest, as the fall from the recent highs has turned the sentiment in favour of the 'bears' at least for now.
The index has already dropped over 7 per cent, or 1,899 points, in less than a month from its all-time high of 26,277 levels.
In the process, the NSE benchmark index has broken the short- and medium-term supports levels, and is currently trading below the 100-day moving average (DMA) placed at 24,565 levels.
If the index is unable to sustain above 24,500 levels, technically it can then slip to its 200-DMA placed at 23,365 levels, charts suggest.
A 38.2 per cent Fibonacci retracement of the earlier bull-run from April 2023 when the Nifty was at 17,500 levels to its recent high, suggests support for the Nifty at 22,920 levels, which is roughly 400 points below the 200-DMA.
Based on this analysis, it will not be wrong to say that in the base case scenario, the Nifty 50 index may test its 200-DMA, or retrace up to 22,920 amid the current market fall.
Similarly, a 61.8 per cent retracement suggests that the NSE benchmark index could slide all the way to 20,846, which could be the worst case scenario at the moment.
The 20-DMA and 50-DMA are considered as short-term moving averages, while the 100-DMA is said to be the medium-term gauge of the strength in an index or a stock.
The thumb rule says that if a stock or an index is quoting above a particular moving average, then the trend is up, and vice versa.
"Bears continue to assert control as intraday bounces are consistently sold-off. The previous support at the 89 DEMA around 24,600 has now turned into a strong resistance. It's wise to avoid complacent long positions. On the upside, 24600 has become a significant resistance, and only a breakout beyond 25,000 might reignite optimism," said Sameet Chavan, head of research, Technical and Derivative at Angel One.
Among the Nifty stocks, 29 out of the 50 stocks that comprise the index (58 per cent of the Nifty constituents) are trading below their respective 100-DMAs, including Reliance Industries, State Bank of India, Hindustan Unilever, Larsen & Toubro and Tata Consultancy Services.
Broader markets
Mirroring the Nifty 50, the broader indices -- the Nifty MidCap 150, Nifty SmallCap 250 and the Nifty 500, too -- are seen quoting below their respective 100-DMA for the third straight day.
Study of the respective indices shows that 64 per cent of the stocks across the MidCap, SmallCap and Nifty 500 indices are trading below the 100-DMAs.
Thus, implying that the overall bias for the market may remain tepid.
100-dma stocks
Prominent stocks below the 100-DMA in the broader market space include the likes of Hero MotoCorp, Godrej Properties, Dabur India, Hindustan Aeronautics, Crompton Greaves, Castrol, SJVN, Yes Bank, Zee Entertainment, Union Bank, SAIL, Tata Elxsi, RVNL, SRF, Ambuja Cements, Cummins, Bharat Forge and LIC.
Nandish Shah, senior derivative analyst at HDFC Securities, however, offers some hope.
He expects the markets to bottom out soon, unless the outcome of the US presidential polls springs a surprise and drags the US markets down, which in turn has a cascading effect on the global peers.
"The advance-decline (AD) ratio hit 0.15 recently, which is the lowest level seen since the outcome of general elections in India on June 04. Historically, when the AD ratio has been between 0.1 and 0.2, we have seen markets bottom out," he said.
"Also, most of the companies in the Nifty have declared their respective September quarter results (Q2-FY25). So, most of the bad news is already in the price."
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Feature Presentation: Aslam Hunani/Rediff.com
