Indian equity markets continued their downward trajectory on Tuesday, with the NSE Nifty 50 declining 144 points to close at 23,635 points and the BSE Sensex losing 555 points to close at 75,577 points. The Nifty has now declined 949 points or 3.9% in the last month, extending its losing streak to seven out of the previous nine trading sessions. The benchmark index has tanked around 1,000 points in the last 25 trading sessions, wherein the index has ended lower in 17 sessions. According to Equirus Wealth's Ankur Punj, over the past few days, renewed hostility between US and Iran has forced investors to take a low-risk stance towards equity assets. The day's slide left investors poorer by about ₹35,000 crore, with BSE's market capitalisation now at ₹486.2 lakh crore. The Bank Nifty index also traded over half a percent lower at 57,000 level, while barring for Nifty Pharma, all the other sectoral indices were trading in the red. Nifty IT and Nifty Media slumped over 2% each, followed by Nifty Metals, Nifty PSU Bank, Nifty FMCG and Nifty Realty indices falling over 1% each.
The biggest pressure on Indian equities came from crude oil prices, with Brent crude rising more than 8% during the week and WTI crude gaining over 9%. Renewed U.S.-Iran hostilities and concerns over possible disruptions around the Strait of Hormuz pushed up the geopolitical risk premium in global energy markets. According to ICICI Securities' Jay Thakkar, Head of Derivatives and Quant Research, international crude oil prices have risen more than 5-6% this week until Friday afternoon, with US bond yields declining by only 3-6 basis points which continues to weigh on market sentiment. The US bond yields have been sensitive to rising crude oil prices as inflation worries increase, with the chances of Fed rate increases also quite high. Higher crude oil prices could also add to inflation concerns and prompt hawkish comments from global central banks, keeping gold within a range. Brent crude has now crossed the US$100 per barrel mark and was trading around US$102 per barrel, with rising attacks on commercial shipping increasing concerns over possible supply disruptions as the conflict continues to intensify.
Foreign institutional investors continued to sell Indian stocks, with September alone seeing net outflows of about ₹12,700 crore, reversing the positive trend of the previous two months. However, since August 10, foreign investors have net bought Indian stocks worth just ₹2,953 crore, combined data from NSDL and BSE showed. The rupee weakened again to close at 94.83 to the dollar, down 34 paise on the day, after remaining strong for two consecutive sessions. According to HDFC Securities' Dilip Parmar, the rupee fell amid persistent risk-off sentiment and higher oil prices, as aggressive dollar-buying outstripped liquidity. The prevailing situation continues to put pressure on the rupee, despite a record $136-billion inflow into India through RBI's special dollar deposit drive from NRIs. Strong DII inflows and stock-specific buying helped limit the downside in the broader market, though persistent foreign selling could continue to limit the market's upside.
Technical analysis reveals that the short-term market trend remains weak, with Nifty continuing to trade below the 50-EMA on the hourly chart. The 23,720-23,700 region acts as crucial support, with a decisive breach below 23,700 potentially triggering further weakness towards 23,500-23,300 levels. On the upside, 24,150-24,200 will act as immediate hurdle, with a sustained move above this range required to ease the prevailing bearish bias. According to SBI Securities' Sudeep Shah, the support zone for Nifty 50 lies in the 23,720-23,700 region, which is important as the 61.8% Fibonacci retracement of the previous upmove from 23,070 to 24,774 is placed around this region. The daily RSI is hovering around 40 and remains below its 9-day average, while the daily ADX has moved above 20 and is rising, suggesting that the prevailing trend is gaining strength. However, the Nifty has also slipped below the 8-EMA, 20-DMA and 50-DMA, currently 1.27% below the 50-DMA. Bajaj Broking Research expects the downside could extend the last one-month decline towards the 23,300-23,200 zone in the coming sessions, representing the 80% retracement of the previous upmove from 23,070 to 24,774.
The domestic market managed to finish higher in the previous session despite persistent downside risks, with Nifty 50 gaining 0.20% to close at 23,477 and Sensex advancing 0.19% to settle at 74,902. According to Bajaj Broking Research, the Nifty's daily chart formed a high-wave candle with a lower high and lower low, pointing towards consolidation with a corrective bias. The immediate trend remains negative, and a sustained formation of higher highs and higher lows on the daily chart would be required to indicate that the current downtrend is losing strength. Pullback attempt will face immediate resistance at Wednesday's gap area of 23,650, while stiff resistance is placed around 23,800-24,000 levels being the recent breakdown area and 20 days EMA. The Bank Nifty formed a small bullish candle but continues to indicate consolidation with a corrective bias, positioned near the lower end of its 10-week trading range of 56,000-58,700. A break below 56,000 could signal further extension of the corrective decline, with next downside levels placed at 55,300 and 54,800.
