Nifty, Sensex breached Budget day levels, below 20-day SMAs; bears in driving seat

The NSE Nifty50 and the BSE Sensex on Monday violated their 20-day simple moving averages with ease and settled the day below the Budget Day (July 23) levels, forming long bearish candles on the daily chart. Analysts said the market momentum has turned weak. The indices are now near their 50-day EMAs (Sensex: 78,709.50, Nifty: 23,960.30. If the indices fall further, 78,300 level on Sensex and 23,900 on Nifty looks likely, they said.  

"Technically, Nifty and Sensex closed below 20-day SMAs after a long time, which is largely negative," said Shrikant Chouhan, Head Equity Research, Kotak Securities. The indices also formed long bearish candle on the daily chart, which supports further weakness from the current levels, he said.

On Monday, Sensex settled the day at 78,759.40, down 2,222.55 points or 2.74 per cent. This was below the level of 80,429.04 that the 30-pack index settled on July 23. Nifty plunged 662.10 points, or 2.68 per cent, to close at 24,055.60. This was lower than a low of 24,074.20 level that Nifty hit on July 23.

"We are of the view that the current market texture is weak and volatile, but due to temporary oversold conditions, we could expect one intraday pullback rally. For day-traders, Nifty and Sensex levels of 24,000 and 78,500 would be the immediate reference point. Above the same, we could expect intraday pullback up to 24,150-24,250 and 79,000-79,300 levels, respectively," Chouhan said.

On the flip side, he sees a Nifty level below 24,000 and a Sensex value below 78,500 to accelerate the pressure. In that case, Nifty may retest the level of 23,900 and Sensex 78,300, he said.

Overcoming the Nifty bearish gap left today between 24,350 and 24,700 would be a daunting task, said Rajesh Bhosale, Equity Technical Analyst at Angel One.

"On the downside, 23,900 followed by 23,600 (the 38.2 per cent retracement of gains from the election day low) are immediate support levels. The key support would be around 23,400-23,300, aligning with the 89-EMA and the 50 per cent retracement of the mentioned upmove. Traders should monitor these levels and adjust their trades accordingly," he said. 

Jatin Gedia – Technical Research Analyst at Sharekhan said Nifty breached below the Budget day levels, violating the uptrend. 

"It has decisively closed below the 20-day moving average (24,575) indicating weakness. We believe that the Nifty is in the process of retracing the rally it witnessed from 21,280 – 25,078. Crucial Fibonacci retracement level is placed at 23,628 and 23,280 is the 20-week moving average. On the upside immediate hurdle is placed at 24,300–24,350," he said.

Rupak De, Senior Technical Analyst at LKP Securities said Nifty found initial support at the 50-EMA before closing slightly higher. The RSI is in a bearish crossover and falling, he said adding that sentiment is likely to remain weak in the short term and the index may weaken further below 23,900. 

"Support is placed at 23,900/23,700. On the higher end, resistance is seen at 24,200/24,500," he said.