What’s Behind the Decline of the Nifty 50? Why Did It Fall Below 23,650?

NiftyTrader • December 30, 2024

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Index	Price	Change	% Chg
Nifty 50	23,644.90	-168.50	-0.71%
Nifty MidCap 50	16,030.35	+110.95	+0.70%
Nifty SmallCap 50	8,870.70	-72.10	-0.81%
Nifty Bank	50,952.75	-358.55	-0.70%
Nifty Financial	23,565.30	-222.70	-0.94%
BSE SENSEX	78,248.13	-450.94	-0.57%

At the close, the Nifty 50 was at 23,644.90 down by 0.71%

Nifty 50 opened the week on a bearish note, falling by 0.71%, closing below the crucial 23,650 mark. The market saw heavy selling in heavyweight stocks, with the overall sentiment skewed negative. The fear index, India VIX, jumped by 5.55% to 13.97, signaling increased market volatility. This unsettling movement was compounded by weak Asian and European cues, falling US bond yields, and persistent foreign fund outflows, making investors more cautious.

Key Points:

Nifty 50 closed below 23,650, indicating a bearish outlook.
India VIX up by 5.55%, reflecting heightened market uncertainty.
Weakness from global markets and continued foreign fund outflows weigh heavily on sentiment.

Nifty Below 23,650: A Bearish Trend in Play?

Nifty’s technical chart paints a troubling picture. A negative candle with an upper shadow hints at a potential downside breakout, signaling further weakness. The key support at the 200-day EMA has been broken again at the 23,700 level, adding to the negative sentiment. Moreover, the unfilled downside gap formed on December 19 suggests a bearish runaway gap, a typical sign of an ongoing downtrend.

Key Points:

200-day EMA support breached at 23,700.
An unfilled downside gap from December 19 adds to bearish momentum.
Technicals suggest more downside risks in the near term.

Is the Rupee’s Slump Impacting the Nifty 50’s Performance?

The Indian rupee’s depreciation continues to weigh on investor sentiment. With the rupee nearing the 86 per-dollar mark, foreign institutional investors (FIIs) are pulling back, reducing exposure to Indian equities. This, coupled with weak global cues, is driving the market down. The Nifty oscillated between 23,600 and 23,900 during the session but ultimately closed lower, confirming bearish pressure in the broader market.

Key Points:

Rupee weakness continues to drive FIIs away from Indian equities.
Global market weakness, especially from the US, adds to the selling pressure.
Nifty’s range-bound movement indicates uncertain market conditions.

Nifty Breaks Key Support Levels: Further Weakness Expected?

Nifty fell sharply below the 200-day EMA at 23,700 with above-average volumes. The RSI is in the lower band, and technical indicators like MACD show a negative crossover, further signaling that selling pressure could intensify. The immediate downside support for Nifty is seen at 23,500, and a breach below this level could open doors for further weakness. Resistance remains at the 23,900–24,000 zone.

Key Points:

200-day EMA break suggests continuing bearish sentiment.
RSI and MACD confirm downward momentum.
Immediate support at 23,500, with resistance near 23,900–24,000.

What Lies Ahead for the Nifty in 2025?

The Nifty 50 continues to face strong headwinds, and the outlook for the short-term remains negative. With global markets uncertain and domestic pressures from weak economic data, the Nifty is likely to stay under pressure. The US bond yield hikes and foreign fund outflows are expected to be major catalysts for further weakness in the Indian equity market. As we approach the end of 2024, market participants need to remain cautious and watch for signs of stabilization.

Key Points:

Nifty’s short-term outlook remains negative.
US bond yield hikes and foreign fund outflows are likely to continue to impact the market.
Investors should watch for signs of stabilization in the coming weeks.

Gold’s Resilience Amid Market Uncertainty: A Safe Haven Investment?

Despite the volatile stock market, gold has remained a preferred investment choice for many. December 2024 saw strong inflows into Indian Gold ETFs, with 14.5 trillion added year-to-date. However, fluctuations in gold prices have dampened demand for jewelry, though the appeal of gold as a safe haven remains strong. Gold prices have fluctuated between INR 73,477 and INR 78,669 per 10 grams since late October but closed the month at INR 77,185.

Key Points:

Gold ETFs saw strong inflows, with 14.5 trillion added in 2024.
Fluctuations in gold prices have impacted jewelry demand but physical investment demand remains steady.
Gold’s long-term outlook remains positive, with potential to reach $3,000 despite short-term volatility.

As the market braces for more volatility and uncertainty, both equity investors and gold buyers are keeping a close eye on global cues and economic indicators. The year-end brings further challenges, but the appeal of gold as a safe-haven investment is undeniable, providing a strong alternative to equities.

Bank Nifty: Down by 0.70%

The Bank Nifty opened lower, down by 0.70%, and closed at 50,952.75, reflecting investor concerns. Similarly, the BSE Sensex also saw a decline of 0.57%, closing at 78,248.13, adding to the pessimistic mood in the broader market.
Both indices struggled due to a combination of factors, including weak global cues, ongoing Foreign Institutional Investor (FII) outflows, and concerns over domestic economic conditions.

In the sectorial front, the Pharma sector has emerged as a strong contender today, rising by 1.01%. But what’s fueling this upward trend? The spotlight is on Lupin Ltd., which has seen a remarkable 3.96% gain, and Biocon Ltd., which isn’t far behind with a solid 3.63% gain.

On the flip side, Media stocks are suffering with a 1.87% decline. Among the biggest losers are Network18 Media & Investments Ltd., plummeting by -3.35%, and Tips Music Ltd., which dropped by -2.25%.

Foreign Institutional Investors (FII) had a net outflow of ₹1,893.16 crore, with a buy value of ₹15,507.56 crore and a sale value of ₹17,400.72 crore.

Domestic Institutional Investors (DII) remained relatively more optimistic. They recorded a net inflow of ₹2,173.86 crore, with a buy value of ₹41,786.62 crore and a sale value of ₹39,612.76 crore.

Bank Nifty

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

The gainers included AU Bank with a 2.00% increase, IDFC First Bank with a 1.71% increase, IndusInd Bank with a 0.80% increase, Federal Bank with a 0.26% increase, and Punjab National Bank with a 0.16% increase.

On the other hand, the biggest losers in the sector included Bank of Baroda with a 1.65% decline, ICICI Bank with a 1.08% decline, Kotak Bank with a 1.06% decline, State Bank of India with a 0.79% decline, and HDFC Bank with a 0.79% decline. These results suggest that some of the banking stocks performed better for the day.

Gold and Silver Rate (INR) 30th December, 2024

22 K Gold / g	₹ 7,150	+ ₹15
24 K Gold / g	₹ 7,800	+ ₹16
18 K Gold / g	₹ 5,850	+ ₹12

Silver / g	₹ 92.50	– ₹0.10
Silver / kg	₹ 92,500	– ₹100

The Rupee Slips to Record Low: Is This the Start of a Bigger Decline?

The Indian Rupee hit a record closing low against the U.S. dollar on Monday, closing at 85.5350, a marginal drop from its previous level of 85.5325. What’s causing this sudden dip? A combination of factors, including a weaker offshore Chinese yuan and widespread dollar bids, has put pressure on the local currency. As global currency markets continue to shift, the rupee seems to be struggling to maintain its position.

Key Points:

Rupee ends at a historic low of 85.5350 against the dollar.
Weaker yuan and strong dollar bids weigh on the rupee.
Asian currencies, including the rupee, mostly lower.

Why Did the Rupee Lose Ground Despite Early Gains?

While the rupee initially rose to a peak of 85.44, it failed to hold on to its gains in the latter half of the day. This was largely due to the broad-based dollar bids from banks and a decline in regional currencies. As the dollar index rose 0.1% to 108.1, the rupee faced mounting pressure. The offshore Chinese yuan also slipped 0.2% to 7.31, driven down by rising U.S. bond yields.

Key Points:

Rupee hits a peak of 85.44 but loses ground.
Dollar index gains 0.1%, pressuring Asian currencies.
Offshore yuan declines by 0.2%, dragging the rupee lower.

Will the Rupee Stabilize or Continue to Weaken?

Analysts predict that the dollar-rupee pair will likely stay within a range of 85.30 to 85.60, with dips expected to be bought. However, near-dated volatility expectations have surged, as 1-month implied volatility spiked to a 16-month peak of 3.7%. The rise in volatility signals growing uncertainty in the currency market. Is the rupee likely to weaken further, or will the Reserve Bank of India intervene?

Key Points:

Dollar-rupee expected to trade within a range of 85.30-85.60.
Rising volatility signals market uncertainty.
RBI’s potential actions could influence the rupee’s movement.

Is the Rupee Facing Multiple Headwinds in 2025?

Looking ahead, market sentiment suggests a growing bearish bias on the rupee. Factors such as higher-for-longer Federal Reserve policy rates, weak capital inflows, and the looming threat of global trade tariffs under a potential Donald Trump administration are adding to the pressure. The 1-month dollar/rupee risk reversal has risen to 0.4, indicating that investors are increasingly willing to bet on the rupee’s decline.

Key Points:

Bearish bias on rupee due to multiple economic headwinds.
Risk reversal rises to 0.4, signaling more bets on the rupee’s fall.
Potential U.S. trade tariffs and Federal Reserve policies could add further strain.

What Lies Ahead for the Rupee in 2025?

As we move into the new year, the outlook for the Indian rupee remains uncertain. The combination of rising global yields, the strong dollar, and the risk of economic policies under a new U.S. administration could continue to put pressure on the rupee. Will the Reserve Bank of India step in to stabilize the currency, or are we facing a prolonged downturn? The next few months could be crucial for the rupee’s trajectory.

Stocks Highlights

In an unexpected twist, Adani Enterprises Ltd. saw its share price surge by 7.26%, closing at Rs 2,585.00, up from Rs 2,409.95. But can this momentum be sustained, or is it a temporary spike? Despite the rise, there’s a dark cloud looming—a 28.87% contraction in sales. For the first time in the last three years, the company witnessed a revenue decline, sending ripples of uncertainty across investors.

The Bears Could Roar Again
Adding to the tension, a weekly stochastic crossover appeared on December 27, 2024, a signal that often predicts an upcoming downturn. Historically, this signal has led to an average decline of -8.13% over the next 7 weeks in the last decade. Could this be a warning sign of a deeper correction?

Key Points:

Adani Enterprises share up by 7.26%, closing at Rs 2,585.00.
Sales de-grew by 28.87%, marking the first revenue contraction in three years.
Bears may be poised to return, with a historical decline of -8.13% following a similar signal.

On the other hand, Hindalco Industries Ltd. has been facing a setback, with its share price slipping by -2.32%, closing at Rs 603.10 from the previous Rs 617.40. The company is also grappling with a 3.12% sales contraction, marking a revenue decline for the first time in three years. But that’s not all—when compared to Nifty Metal, Hindalco’s 37.31% three-year return seems distant compared to the 57.45% return from its peers. Is Hindalco falling behind, or is this just a temporary hurdle?

Tough Times for Hindalco
Despite this, the stock still outperformed the broader Nifty 100 index, which delivered a 40.74% return over three years. However, the company’s interest expense is a concern, with 1.79% of revenues spent on interest and 6.84% on employee costs for the year ending March 31, 2024.

Key Points:

Hindalco share price falls by -2.32%, closing at Rs 603.10.
Sales down by 3.12%, marking the first revenue contraction in three years.
Hindalco outperformed Nifty 100, but lagged behind Nifty Metal.
Employee costs at 6.84% and interest expenses at 1.79% of revenue.

Advance Decline Ratio

Today, the advance-decline ratio was 0.44 and the market breadth was negative. The volatility index India Vix increased by 5.55 to settle at 13.97 and the FIIs were net sellers today.

DAILY MARKET ACTION
Advancers – 871
Decliners – 1972
52Wk High – 69
52Wk Low – 97
High Band Hitters – 86
Low Band Hitters – 122
200d SMA – 23868
50d SMA – 24197
20d SMA – 24260

Top Gainers and Losers Stocks

The top gainers were Adani Enterprises (+7.26%), Tech Mahindra (+1.03%), HCL Technologies (+0.99%), IndusInd Bank (+0.80%), and Shriram Finance (+0.79%).

The top losers were Hindalco (-2.32%), Tata Motors (-2.03%), Trent (-2.01%), BEL (-2.00%), and Wipro (-1.65%).

Top Gainers and Losers Sectors

The top gainers sector were Pharma (+1.01%), IT (+0.57%), FMCG (+0.31%), and Consumer Durables (+0.24%).

The top losers sectors were Media (-1.87%), Realty (-1.54%), Auto (-1.43%), Metal (-1.27%), and Financial Services (-0.94%).

SECTORS – NOTABLE ACTION
PHARMA +1.01%
IT +0.57%
FMCG +0.31%
MEDIA -1.87%
REALTY -1.54%
AUTO -1.43%

Stocks Ban List

The SEBI F&O ban list does not include any stocks today.

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.