Last week, we noted that the structure of this bull move was flawed, suggesting that every step forward should be taken with caution. We highlighted that the primary challenge for the bulls was to cross and sustain a closing above the resistance zone of 24522-24576. Conversely, for the bears, the goal was to break and close below the support at 24218, followed by the deeper supports of 24050-23783. While the market managed to close exactly at 24576 on the first day, the bears launched a strong offensive from the following day onwards. By the end of the week, the index touched a low of 23813 before finally settling at 23898. During the initial days, mixed results from HDFC and ICICI Bank were followed by stability from FMCG giants and Tech stocks. However, disappointing results from subsequent Tech majors led to a massive sell-off. This, combined with renewed geopolitical tensions pushing Brent Crude to 105 and poor performance from certain public sector banks, led to the market’s decline. Generally, banking and auto sectors recorded heavy selling pressure. The partial withdrawal of foreign currency restrictions further weakened the Rupee, which closed above 94. Let’s look at what to expect in the coming days.
The only relief in Nifty last week was that it managed to hold the crucial support of 23783. Therefore, this will remain the primary focus in the coming days. The first hurdle will be to maintain this level and achieve a close at least above 24120. Beyond that, the key levels to watch on the upside include the newly formed resistance zones at 24209-24436, as well as the pre-existing resistance levels at 24529-24600-24703-24854. If the aforementioned 23783 level is lost, the journey is likely to continue downward. A test of strength would then occur at the 23555-23172-22930-22719 levels. Looking at sectors, the bulls have only managed to establish a foothold in Energy, Metal, and Public Sector stocks; most other sectors remain firmly under the control of the bears.
Brent Crude closed last week at 105.07. From here, a resistance zone has formed in the 111.50-112 range, with a major resistance above that at 115.95. On the downside, 101 acts as a support, and if that is lost, the primary support sits at 91.15. As long as Crude does not break through the 112-116 resistance zones, the stock market is likely to react to these prices as a ‘New Normal.’ Gold and Silver, which finished the week at major support levels, are the other two stars to watch. It was previously mentioned that 4710 is the support for Gold, while 75.35 is the crucial support for Silver. Both remained in these zones last week. Only if these levels are breached will the next significant move gain momentum.