The Nifty has experienced a dramatic reversal, declining 359 points or 1.5% to close at 23,547 on Friday, May 29, marking its third consecutive session of decline after a strong bullish reversal above the crucial 23,850 resistance level. According to CNBC TV18, the index attempted a recovery in early trade but failed to hold gains, with selling pressure intensifying through the session and dragging the index more than 500 points from the day's high. This sharp reversal comes after the index had demonstrated a strong bullish reversal during Monday's session, breaking out decisively above the 23,850 resistance level after forming a triangle pattern around the 50 percent Fibonacci retracement level. The nearly 300 points of the decline came during the final 30 minutes of trade, signalling a sharp deterioration in sentiment and loss of momentum following the recent failed breakout attempt.
Market analysts provide increasingly bearish outlooks following the sharp reversal. Nandish Shah of HDFC Securities notes that the Nifty continues to face strong resistance near its 50-day exponential moving average (EMA) at 23,981, with the short-term trend turning weak after the index slipped below key moving averages. He identifies Friday's low of 23,484 as immediate support, with a decisive breach below this level potentially opening the door for a decline towards the next support zone around 23,260. LKP Securities' Rupak De confirms that the Nifty repeatedly faced resistance near the 50-day EMA throughout the week before witnessing a sharp breakdown on Friday, with the index also breaking below a rising trendline on the daily chart, indicating a revival of bearish sentiment. Immediate resistance is placed near 23,700, and selling pressure is likely to persist as long as the index remains below that mark.
The Bank Nifty has emerged as a key contributor with the index ending the day at 54,239, down 1.12% after trading in a narrow range of 55,184 to 54,761 before breaking lower in the second half of the session. According to CNBC TV18, the index fell more than 1% during the broader market decline, with profit-booking weighing on the banking sector. Sudeep Shah of SBI Securities identifies immediate support for Bank Nifty in the 53,800-53,700 zone, with a sustained move below this range potentially leading to further weakness towards 53,300 and then 52,900. The banking index staged a sharp recovery on Monday after successfully filling its gap and rebounding from the 61.8 percent Fibonacci retracement level of its previous rally, but the recent decline indicates renewed selling pressure in the sector.
Market breadth remained under pressure on Friday, with the broader market ending nearly 2% lower as both the Sensex and Nifty declined significantly. The Nifty Midcap 100 and Smallcap 100 indices declined 1.33% and 0.85% respectively, indicating widespread selling across market segments. Among Nifty constituents, Tech Mahindra, HCLTech and Wipro were the top gainers, while Power Grid, InterGlobe Aviation and ONGC led the losses. Sectorally, Nifty IT was the only index to close in positive territory, while Oil & Gas, Metal and Auto stocks were among the biggest drags. The India VIX has fallen sharply below the 17 level, and if it manages to close below 16, it would mark a clear breakdown from the 20–16 range, with the next target zone potentially 12–13.
Several important factors will influence market direction in the coming sessions. The RBI policy decision next week remains a critical factor, with focus on the Monetary Policy Committee's stance and interest rate decision, along with remarks from Governor Sanjay Malhotra on the economic road ahead. Investors will also closely track developments in US-Iran negotiations, crude oil price movements and shipping activity through the Strait of Hormuz. The Indian rupee outperformed its Asian peers, appreciating 69 paise to its highest closing level since May 8, posting its strongest single-day gain since April 2, aided by softer crude oil prices, suspected RBI intervention and optimism surrounding a possible extension of the US-Iran ceasefire. Any escalation in geopolitical tensions could trigger fresh volatility across global markets, making the upcoming policy decisions particularly crucial for market direction.
