Is the Nifty on the brink of a critical collapse as it breaks the Bearish Flag? What lies ahead if it can’t defend 24,700?

At the close, the Nifty 50 was at 24,749.85 down by 0.89%

In a dramatic turn of events, the NSE Nifty 50 opened in the red today, closing down by 0.89% and settling below the critical mark of 24,750. The benchmark equity indices ended the session on a bearish note, mirroring the struggles faced by their Asian counterparts amid the expiry of Nifty50 contracts on Thursday.

The Nifty 50’s losses extended for the third consecutive session, closing at 24,749.85, down 221.45 points. Initially, the Indian indices appeared buoyed by positive global cues, opening above 25,000. However, early gains quickly evaporated, and the index faced relentless selling pressure, dragging it further down throughout the day.

“Finally, the Index broke its range of 24,920-25,200. Following a muted opening, the Auto sector led the charge downward, and in the latter half of the trading session, another wave of selling pushed the Index lower, closing at 24,749.85. Barring IT, all sectors ended the day in the red, with Realty and Auto being the primary laggards.”

A bearish marubozu open candle on the daily chart signals a strong bear dominance, yet the Nifty rests at a crucial support level of 24,750, previously tested on September 9 and October 7. A break below this support could drag the index towards 24,430, while a reversal may find resistance at 24,950.

“Indian equity benchmarks witnessed a sharp sell-off on Thursday, with the Nifty falling below the 24,750 mark, primarily pulled down by auto stocks following Bajaj Auto’s dismal festival sales commentary.”

While the short-term outlook appears grim with the Nifty breaking down from a bearish flag pattern, indicating potential further declines, this might not be the best moment to initiate short positions. The index is nearing a double-bottom support, which could prompt a near-term recovery toward 25,000. However, a decisive fall below 24,700 could herald significant market corrections.

The Nifty 50 has plummeted over 200 points to a nearly two-month low, decisively breaching the Bearish Flag pattern, which suggests more downside in the days ahead. Compounding the negative sentiment, the index has also fallen below a rising support trendline, signaling further weakness. Immediate support now lies at 24,700.

Market sentiment is being severely impacted by weak Q2 results, leading to substantial losses across various sectors, particularly auto, realty, consumer durables, and finance. This downturn stems from lackluster sales forecasts for the festive season, high NPAs, and slow credit growth. However, the IT sector has emerged as a surprising outperformer, buoyed by in-line Q2 results.

The domestic market is facing significant losses, dragged down by intense selling in realty, auto, and consumer discretionary stocks, marking a troubling trend that has persisted for three days amid ongoing foreign fund outflows.

In stark contrast, Domestic Institutional Investors (DIIs) have invested over Rs. 4 lakh crore in the stock market this year, a record-setting figure with two months still remaining. This surge in DII investments coincides with a notable sell-off by foreign investors, who have been net sellers of nearly Rs. 68,000 crore in October alone, primarily due to geopolitical tensions.

Interestingly, the pace of DII investments has been remarkable: reaching the first trillion in just 57 trading sessions, the second in 40 sessions, the third in 60, and the fourth trillion in a record 31 sessions. Even in October, DIIs invested over Rs. 60,000 crore, marking the highest monthly inflow on record amidst foreign selling.

“Markets continued their downward trajectory despite firm US and European cues, as foreign fund selling combined with a sharp decline in automobile stocks weighed heavily on investor sentiment ahead of Hyundai’s IPO subscription final day.”

As uncertainty looms, one must ask: Is this merely a temporary setback, or are we witnessing the beginning of a more significant market correction?

Bank Nifty: Down by 0.99%

Bank Nifty started the day on a sour note, opening in the red and quickly plunging by 0.99%. By the end of the session, it closed at 51,288.80, deepening the losses. But that wasn’t all—BSE Sensex followed the same path, ending the day down by 0.61%, closing at a low of 81,006.61.

The IT sector emerged as a clear winner, posting a significant gain of 1.19%. Leading the charge within this sector was MphasiS Ltd., which saw an impressive rise of 6.17%, while Infosys Ltd. followed closely with a gain of 2.84%.

On the other hand, the Realty sector faced a sharp decline, emerging as the day’s worst performer with a loss of -3.76%. Within this sector, Oberoi Realty Ltd. saw a substantial drop of -6.43%, and Macrotech Developers Ltd. also suffered, losing -4.59%.

(FIIs) have unleashed a wave of selling, recording a buy value of Rs. 9,721.10 crore against a staggering sale value of Rs. 17,142.50 crore. The net result? A significant net outflow of Rs. 7,421.40 crore.

(DIIs) are stepping up to the plate. With a buy value of Rs. 16,817.01 crore and a sale value of Rs. 11,837.18 crore, DIIs managed to secure a net inflow of Rs. 4,979.83 crore.

Bank Nifty

The Nifty Banking sector had some gainers and some losers for the day.

The gainers included State Bank of India with a 0.73% increase.

On the other hand, the biggest losers in the sector included Punjab National Bank with a 2.22% decline, Canara Bank with a 1.94% decline, Axis Bank with a 1.93% decline, HDFC Bank with a 1.59% decline, and AU Bank with a 1.41% decline. These results suggest that almost all of the banking stocks not performed better for the day.

Gold and Silver Rate (INR) 17th October, 2024

Stocks Highlights

In today’s market, Infosys Ltd. witnessed a rise of 2.84%, with its share price climbing from Rs 1,920.10 to Rs 1,974.55. The company’s financial management continues to be strong, with less than 1% of its operating revenues directed toward interest expenses and a substantial 53.76% allocated to employee costs by the end of March 2024.

However, technical indicators reveal a cautionary note: the 20-day moving average crossover appeared, signaling a potential sell. Historically, this has led to an average price decline of -2.11% within seven days. Furthermore, the 14-day moving crossover reinforces a bearish trend, hinting at an additional drop of -1.92% in the short term.

In contrast, Bajaj Auto Ltd. faced a steep drop of -13.11%, with its stock price falling from Rs 11,616.95 to Rs 10,093.50. A key factor behind this decline is the company taking on debt for the first time in five years, which has raised concerns among investors.

Despite this, Bajaj Auto’s financial performance remains solid, with an annual revenue growth of 23.02%, surpassing its three-year CAGR of 16.68%. However, similar to Infosys, Bajaj Auto has triggered a 20-day moving average crossover, historically leading to a -1.54% price decline within seven days.

Advance Decline Ratio

Today, the advance-decline ratio was 0.32, and the market breadth was negative. The volatility index India Vix increased by 2.56 to settle at 13.39 and the FIIs were net sellers today.

DAILY MARKET ACTION
Advancers – 671
Decliners – 2065
52Wk High – 76
52Wk Low – 36
High Band Hitters – 95
Low Band Hitters – 73
200d SMA – 23291
50d SMA – 25094
20d SMA – 25401

Top Gainers and Losers Stocks

The top gainers were Infosys (+2.84%), Tech Mahindra (+2.81%), Power Grid (+1.21%), LT (+0.95%), and SBIN (+0.73%).

The top losers were Bajaj Auto (-13.11%), Shriram Finance (-4.11%), M&M (-3.52%), Nestle India (-3.44%), and Hero MotoCorp (-3.39%).

Top Gainers and Losers Sectors

The top gainers sector were IT (+1.19%).

The top losers sector were Realty (-3.76%), Auto (-3.54%), Consumer Durables (-2.20%), Media (-2.18%), and FMCG (-1.64%), .

SECTORS – NOTABLE ACTION
IT +1.19%
REALTY -3.76%
AUTO -3.54%
CONSUMER DURABLES -2.20%

Stocks Ban List

(SEBI) F&O ban list (BANDHANBNK close at -190.19), (IEX close at -191.16), (LTF close at -166.41), (TATACHEM close at -1073.85), (GNFC close at -639.20), (CHAMBLFERT close at -500.30), (NATIONALUM close at +225.17), (PNB close at -102.46), (MANAPPURAM close at +177.33), (HINDCOPPER close at -317.20), (SAIL close at -127.83), (GRANULES close at -594.45), (IDFCFIRSTB close at -71.74), and (RBLBANK close at -202.45) are not currently on the stock exchange.

A stock enters the Ban List if its MWPL is above 95%. Implying that, Ban List shows the Futures and Options (FnO) stocks whose combined open interest in all FnO contracts for a given period crosses 95% of Market-Wide Position Limit.

AARTIIND, EXIDEIND, BSOFT, ABFRL, NMDC, PEL, GMRINFRA, CANBK, LICHSGFIN, PVRINOX, BIOCON, and ADANIENT stocks has the possibilities of entrance in the ban list.

SAIL, GRANULES, IDFCFIRSTB, and RBLBANK stocks has the possibilities of exit from the ban list.

Daily Pivots

As per the above pivots data, 24500 to 25100 is the Nifty 50 trading range.

Read Previous -Daily Insights- here
Is the Nifty at a Tipping Point? Indices Decline as the Nifty Struggles to Stay Afloat—Can it Overcome the Downtrend?
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This article is only for educational purposes and is not an investment advice.