The Nifty 50 has fallen further below its 200-day moving average (200-DMA), with the latest drop of 5.75% suggesting a bearish trend that extends beyond routine market corrections. According to Choice Broking's technical research analyst Hitesh Tailor, the 200-DMA break is a widely tracked indicator of long-term market trend, with a break below it often seen as a sign of weakening investor sentiment. The 200-day EMA (exponential moving average) shows similar signs, with Nifty trading below its 200-day EMA for the past 22 trading sessions starting from August 14, during which the index has gradually moved further below its long-term moving average and is now down 5.12% from the 200-day EMA. Tailor notes that the 200 DMA is now likely to act as an important resistance zone, and until the Nifty decisively reclaims and sustains above this level, rallies are likely to face selling pressure.
The Nifty 50 has entered oversold territory with the Relative Strength Index (RSI) slipping to 30, a level typically associated with stretched selling pressure. According to ET Now, the benchmark has remained largely flat over the past week, while losses have been relatively steeper over the one-month and three-month periods. The index has declined 3.43% over the past month and 3.48% over three months, with year-to-date performance showing a 10.79% decline. The 6-month performance stands at -1.90%, while 1-year performance shows -8.25%, indicating sustained pressure across multiple timeframes. Technical indicators suggest the Nifty 50 index is hovering near oversold territory, with the RSI slipping to 30, a level typically associated with stretched selling pressure.
After two years of remaining cautious on the Indian stock market, Bank of America (BofA) Securities has turned constructive on Nifty and sees 12% upside potential in the benchmark index to rally to 26,200 by December 2026. According to the latest note from BofA Securities, the brokerage highlighted that its earlier cautious stance that markets may stay volatile was driven by eight risks, out of which five have already played out or been priced in. The remaining three risks could pose a 7% downside risk for Nifty in its bear case, but in its base case scenario, it sees potential for Nifty at 26,200 by December 2026. BofA expects no further acceleration in aluminum and copper prices, and its economist expects the RBI to hike its policy repo rate by 25 bps by December 2026, lower than the 45 bps hikes already priced in by the swap markets. The Federal Reserve officials expect one more interest rate increase this year after raising rates on Wednesday and expect to hold them steady in 2027, according to Reuters.
The Nifty's continued decline is attributed to a combination of rising US bond yields and elevated crude oil prices, along with increasing concerns about inflation in India. The yield on the 10-year US Treasury rose from 4.7% to 5% between August 17 and September 15, making US debt more attractive to investors and prompting a shift towards safer fixed-income assets. Meanwhile, crude oil prices climbed to $104.45 per barrel as of 9:20 am on Wednesday, raising concerns over higher input costs and the potential impact on inflation and corporate margins. Domestically, investors are closely watching India's retail inflation, which accelerated to a 20-month high of 4.82% in August, raising concerns that persistent price pressures could prompt the Reserve Bank of India to consider raising interest rates to curb inflation. As per The Economic Times, analysts now suggest the indices have entered oversold territory, indicating a potential short-term rebound. The escalation of the Middle East conflict has added to concerns over crude oil prices, inflation and global risk sentiment.
Despite the fragile technical setup and downside-aligned trend, technical indicators are now pointing towards oversold readings, reducing the likelihood of an extended decline. As reported by Business Standard, the recovery during the final trading session, coupled with prices approaching the crucial 23,200–23,000 support band, suggests a near-term bounce cannot be ruled out. The 23,450–23,500 band is expected to act as immediate resistance, followed by stronger resistance at 23,600–23,650, while the 23,200 level will provide immediate support. However, as noted by The Economic Times, the technical structure has deteriorated following the violation of the important 23,900–24,000 support zone, which had provided support during recent consolidation but will now act as resistance on any pullback. Vipin Kumar, AVP Equity Research at Globe Capital Market Ltd, recommends a "sell-on-rise" stance as long as the index trades below 23,450–23,600, as the broader chart structure remains bearish. Rajesh Palviya, Head of Research at Axis Direct, notes that a break below 23,100 could drag the index towards 22,900, while sustained trade above 23,360–23,400 may open the way towards 23,600.
Market breadth indicators highlight the extent of ongoing weakness, with more than 80% of stocks in the NIFTY 50 basket and nearly 70% of stocks in the NIFTY 500 currently in a downswing. According to the analysis reported by Business Standard, this significant deterioration in market breadth, combined with prices approaching key support levels, supports the expectation of a short-term bounce in coming sessions. However, such recovery should not be construed as a trend reversal, as a meaningful reversal in the broader trend still appears unlikely. As per The Economic Times, the technical structure has also weakened as Nifty has slipped below its 100-week moving average at 24,401 and remains below the 50-week MA at 24,673. BofA notes that weak monsoon expectations with current deficits at 13% are already close to worst case weather forecast of 15% deficits.
Technical analyst Hitesh Rathi from Angel One recommends Black Box Ltd. for buying around ₹800-₹795 with a stop-loss of ₹707 and target price of ₹950-₹980. For Adani Ports & Special Economic Zone, he suggests buying around ₹1,765-₹1,760 with a stop-loss of ₹1,570 and target price of ₹2,000-₹2,010. According to The Economic Times, traders are advised to consider specific strategies like a Bull Put Spread for the September 29, 2026 expiry. Several top stocks, including Kotak Mahindra Bank and BHEL, are recommended for buying with defined targets. Additionally, three stocks have emerged as top technical picks for the week: Apollo is expected to move towards ₹450 after a falling channel breakout, while Laurus Labs could target ₹2,100 amid a strong uptrend, and Eternal also looks poised for a short-term recovery with a target of ₹347. BofA concludes that "across market caps, the stocks that we prefer are either those that offer value or high earnings growth or visibility."
