India's benchmark equity indices extended their decline on Monday, with the Nifty 50 falling 1.56% to 22,780.25 and the Sensex ending at 72,771.72, down 1.52%. The latest decline has pushed the Nifty to its lowest level in five months since early April, with the NSE's total market capitalisation falling below the $5 trillion mark to $4.89 trillion. The Nifty closed 2.5% above its 52-week low, highlighting the severity of the current correction. As per Business Standard, the decline mirrored falls in Asian peers, with Asian markets such as Japan, China, and South Korea falling 0.7-2.7%, while Hong Kong ended 0.54% higher. The broader market weakness was evident with the Nifty Midcap 150 and Smallcap 250 indices declining 1.63% each.
The sharp market decline was triggered by surging crude oil prices and geopolitical uncertainties, with Brent crude futures trading around $108 per barrel on Monday evening as reported by Business Standard. US President Donald Trump has rejected Iran's proposal to resolve the conflict and reopen the Strait of Hormuz, reviving concerns over prolonged supply disruptions and making oil prices the dominant factor for global markets. Ponmudi R, CEO of Enrich Money, noted that markets are likely to remain cautious as renewed geopolitical uncertainty and the rebound in crude oil prices weigh on investor sentiment. Additionally, Foreign Institutional Investors (FIIs) offloaded equities worth ₹3,693.93 crore on Friday, further impacting market sentiment. Geopolitical tensions in the Middle East are also keeping oil-market risks elevated, with developments around Iran and the Strait of Hormuz likely to remain in focus, while renewed security threats from Houthi rebels in the region could further add to concerns around crude prices and inflation.
The banking sector took the maximum hit as bond yields shot up significantly, with Indian 10-year yields reaching a two-year high of 7.18%. The Nifty Private Bank index declined 1.5%, while the PSU Bank index fell 3.2% on Monday. As per Pankaj Pandey, head of fundamental research at ICICIdirect, largecaps have struggled amid stock-specific concerns, including the potential impact of rising bond yields on public-sector banks, the implications of the Insurance Regulatory and Development Authority of India circular for private banks, and succession-related issues at HDFC Bank, Kotak Mahindra Bank, and Tata group. Pandey noted that near-term weakness could persist unless these concerns ease or crude prices cool off, which may not happen quickly. The weakness in banking and financial services space contributed significantly to the overall market decline, highlighting investor concerns about these key sectors.
Despite slipping below 23,072 during the week, the Nifty managed to recover and close above this level on a weekly basis, making 23,072 an important support zone for upcoming sessions. However, the latest decline has pushed the index below this level, with analysts now identifying 22,650-22,700 as the immediate support zone for the near term. As reported by CNBC TV18, Sudeep Shah of SBI Securities noted that the 22,900-22,950 zone will be a crucial resistance area going ahead, with the index potentially moving towards 22,650 and then 22,500 if the prevailing bearish trend remains intact. Shrikant Chouhan of Kotak Securities identified 22,800 as a key level to watch, with a sustained move below this level potentially keeping sentiment weak, while a move above could trigger a bounce towards 23,000-23,050. The zone of 11.0–11.3 is likely to act as immediate support, while 15.3–15.5 is expected to serve as a key resistance zone, with a decisive and sustained move above this resistance potentially triggering further rise in India VIX and keeping markets under pressure in the near term.
The Nifty is currently trading around 3.56% below its 50-day moving average, highlighting the extent of recent weakness according to the analysis. Weekly Bollinger Bands have started expanding, suggesting larger price moves could continue in the near term. The weekly RSI has improved to 34.42 from oversold territory and moved above its signal average of 31.41, pointing to an early recovery in short-term momentum, though its position below the neutral 50 mark indicates that momentum remains weak. The MACD remains bearish across multiple timeframes, with the MACD line at -243.79 below the signal line at -226.15, confirming the broader bearish momentum. The Upstox News Desk reports that the NIFTY50 remains in a clear short-term downtrend despite Friday's rebound, trading below its falling 20-day and 50-day EMA. The ADX is at 31.99, suggesting that the prevailing downtrend still has strength, with market breadth remaining deeply weak with only 15% of NIFTY50 constituents trading above their 50-day moving average. Given the monthly expiry and shortened trading week, traders should remain selective, avoid aggressive positions, and wait for price confirmation before increasing exposure, with the overall technical structure remaining fragile and the prevailing trend continuing to favour caution.
