Indian equity markets witnessed a sharp reversal on Thursday, with NIFTY50 closing at 23,873.45, marking its lowest closing level since July 24. According to latest technical analysis, the index formed a bearish closing marubozu pattern, closing down more than 150 points from its intraday high and settling at the day's low. The NIFTY50 started Thursday's session on a positive note, opening with a gap-up and reclaiming the crucial psychological level of 24,000 soon after the opening bell. However, profit booking emerged as the index gradually surrendered its early gains and slipped below the 23,900 mark, with the index breadth remaining weak as 29 of the 50 Nifty stocks ended in negative territory while 21 stocks closed higher. The closing auction session (CAS) on its weekly expiry day saw a sharper decline for SENSEX, while NIFTY50 faced resistance above the 24,000 mark, with only 18 stocks in the NIFTY50 advancing during the session.
The market surge was attributed to positive developments in the regulatory environment, particularly regarding SEBI's ongoing review of capital market regulations. As reported by Upstox Securities, this regulatory review has created optimism among investors and market participants, contributing significantly to the day's strong performance. The regulatory developments have provided a boost to investor sentiment and market confidence, with capital market stocks leading the rally. However, selling pressure emerged above 24,000 points as the index faced resistance, with only 18 stocks in the NIFTY50 advancing, exposing underlying weakness across the board. SEBI also announced plans to review the methodology for calculating settlement prices of derivative contracts on expiry, following feedback from market participants after the introduction of the new closing auction session (CAS) in the equity cash market.
Nifty Realty emerged as the top sectoral performer, advancing 2.58% during the session, while Nifty IT remained under pressure and ended as the biggest sectoral loser, declining 0.85%. Information technology stocks continued to trade lower, with Tech Mahindra, Sun Pharma, TCS, UltraTech Cement, Bajaj Finance, Kotak Mahindra Bank, Maruti Suzuki, IndiGo and Hindustan Unilever (HUL) shares dropping more than 1% each. However, Axis Bank and Adani Ports shares gained nearly 1% each, bucking the broader trend. In the broader market, NIFTY Smallcap 100 jumped 1.20% while NIFTY Midcap 100 index gained 0.37%, leading to favorable market breadth with NSE seeing 2,208 advances against 1,313 declines, while 107 stocks remained unchanged. The outperformance of mid and small-cap stocks provided some support to the overall market sentiment.
Banking stocks provided crucial support to benchmark indices throughout the session, with heavyweights ICICI Bank and HDFC Bank gaining nearly 2% and 1%, respectively. Axis Bank was up 2% and State Bank of India was up 0.4%, while NIFTY PSU Bank and NIFTY Private Bank rose around 1%. The banking sector strength was driven by better-than-expected foreign fund inflows through the special foreign exchange swap window and strong mobilisation of foreign currency non-resident (banks) deposits. The Reserve Bank of India reported that the special foreign exchange swap window attracted total foreign exchange inflows of $136.38 billion as of Monday, with FCNR(B) deposits garnering $127.23 billion. As per V K Vijayakumar from Geojit Investments, the huge FCNR(B) mobilisation by banks will help improve their net interest margins, which is positive for banking stocks.
The NIFTY50 continues to trade below its short-, medium-, and long-term moving averages, keeping the overall technical structure under pressure. The recent breakdown from a trading range of nearly 424 points remains a concern, with the index closing below the 23,900 mark and near the day's low. If the index fails to hold the September 2 low of 23,787, it could move towards the measured target of 23,600–23,528 zone, near the July low. On the upside, the NIFTY 50 needs to reclaim and sustain above the 24,025–24,028 zone, which represents Thursday's high and the 100-DMA. A decisive break below 23,787 could open the door for further correction towards 23,600–23,528, while a sustained move above this level could trigger short covering and push the index towards the 50-DMA at 24,207. The near-term structure remains cautious, with aggressive bullish positions remaining risky until the index shows strength above key resistance levels.
