Indian benchmark indices have entered unprecedented territory with the Nifty 50 falling below its 200-day moving average on a weekly basis for the first time since March 2020, marking a critical technical breakdown after seven consecutive weeks of decline. According to latest reports, the index is down 2.3% this week and is on track for an eighth straight weekly decline, which would make it the longest losing streak since 2001, when Nifty fell for nine consecutive weeks. The 30-stock BSE Sensex breached the same support level last week, indicating widespread market weakness across all major indices. The rout has been driven by a convergence of pressures rather than a single trigger, with India's reliance on oil imports meaning rising prices threaten to fan inflation and cloud its growth outlook. A relentless rally in global bond yields is making local shares less attractive, prompting foreign investors to pull out even more money, while the lack of meaningful AI plays has further diminished the appeal of Indian equities among global money managers.
The Nifty 50 recovered above its 200-week moving average (200-WMA) at 22,606 on Wednesday after briefly dipping below this crucial technical level on Tuesday, according to SBI Securities. The 22,400-22,600 zone now remains a crucial support area for the benchmark, as noted by Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities. This recovery brings the index back into focus after the brief dip below the 200-WMA, which had marked a critical technical breakdown. Shah emphasized that the current seven-week losing streak is rare, with only six such instances recorded since 1992, making the technical recovery particularly significant. Historically, the end of such losing streaks has been followed by an average gain of around 11% in one month and 39% over 12 months, though the small historical sample means outcomes have varied considerably across episodes.
Crude oil prices steadied during Asian trading hours after declining nearly 3% in the previous session, with September Brent crude futures quoted at $103.73 per barrel, up 1.11% in early trade on Wednesday. The fall came after Saudi Arabia restored half of the capacity of its East-West pipeline following drone attacks, easing some concerns over the immediate supply outlook. Oil prices remain a key trigger for Indian equities, particularly amid concerns over their potential impact on inflation and broader macroeconomic stability. Rising crude prices continued to weigh on the market, with seven Nifty stocks ending at their 52-week lows during the recent selloff. The West Asia situation remains challenging as repeated attacks on ships in the Persian Gulf keep crude oil prices elevated, though the latest developments suggest some stabilization in the oil market.
The Indian benchmark indices declined marginally on Wednesday as the Sensex fell over 48 points to close at 72,480 and the Nifty ended 95 points lower to settle at 22,620 at 3:30 PM. Previously, during the early morning close, the Sensex fell more than 70 points and tested 72,450, while the NSE Nifty50 took a hit of over 50 points and inched closer to 22,650, as of 9:15 AM. The index is currently trading around 5.08% below its 50-DMA, highlighting the extent of the recent correction, while the 14-period daily RSI is in oversold territory. Tuesday's price action resulted in the formation of a hammer-like candlestick pattern, with a long lower shadow and a small real body near the upper end of the trading range. The low of Tuesday's session at 22,569 will be the immediate support level, with a sustained break below this level potentially leading to further weakness towards 22,283–22,182.
The Nifty's recovery above its 200-week moving average raises the possibility of a near-term rebound, with the index historically witnessing rebounds after testing this long-term support zone, according to Ajit Mishra, SVP of Research at Religare Broking. However, it is too early to conclude that the current recovery marks the beginning of a trend reversal, as noted by Shah from SBI Securities. The broader market backdrop remains important, with elevated crude oil prices, global bond yields and foreign investor outflows continuing to weigh on sentiment. The 200-WMA also remains a key technical level to watch, with decisive breaks below the moving average historically preceding major corrections, such as the 2008-09 financial crisis and 2020 Covid-led sell-off, which saw the Nifty fall around 38% and 27% respectively. The immediate support for the Nifty now stands near 22,737, with a sustained close below this level potentially triggering further weakness. For now, traders should closely monitor the 22,569 support level, as long as the index holds above this mark, aggressive fresh short positions may be avoided. A sustained move above immediate resistance levels, along with confirmation of the hammer pattern, could open the possibility of a pullback rally.
