The Indian stock market is poised for a challenging start this Friday, with the Sensex and Nifty 50 indices expected to open lower, reflecting mixed signals from global markets. Following a steep decline in the previous trading session, where both major indices plummeted over 2%, investor sentiment remains cautious.
Additionally, trends indicated by the GIFT Nifty suggest a bearish outlook for the Indian benchmark index, trading around the 25,425 mark—nearly 50 points below the previous close of Nifty futures. These indicators reflect an uncertain environment contributing to the anticipated weak opening.
On Thursday, the Indian equity markets experienced significant turmoil, with benchmark indices falling sharply amidst escalating tensions related to the ongoing Iran-Israel conflict. Such geopolitical factors have a propensity to influence market volatility.
The Sensex faced a massive drop of 1,769.19 points, or 2.10%, concluding at 82,497.10. The Nifty 50 also saw a decline, closing 546.80 points, or 2.12% lower at 25,250.10. This dramatic sell-off indicates increasing unease among investors.
The Nifty 50’s formation of a long bearish candle on the daily chart, coupled with an elongated upper shadow, underscores the prevailing negative market sentiment.
According to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, the emerging technical patterns indicate persistent selling pressure in the market. The unfilled opening downside gap observed on Thursday suggests potential further weakness. Key support levels, including the daily 10 and 20 period moving averages, have been breached, reinforcing bearish sentiment among traders.
Despite the recent downturn, some technical analysis suggests that the positive chart patterns of higher tops and bottoms remain intact, although current price actions may negate this bullish setup.
Given Thursday’s sharp decline, the short-term market sentiment has shifted to bearish, with analysts positing that Nifty 50 might retest critical support levels between 25,100 and 25,050 in the near term before any potential recovery.
Below is a summary of expectations for Nifty 50 and Bank Nifty:
Nifty OI Data
Chandan Taparia, Head of Equity Derivatives & Technical Analysis at MOFSL, highlighted that the maximum Call Open Interest (OI) is concentrated at the 26,000 and 27,000 strike prices, while the maximum Put OI lies at the 25,000 and 24,000 strikes. Such data reflects traders’ sentiment regarding the market’s forthcoming volatility.
Call writing activity is prominent at the 26,000 and 25,500 strikes, while Put writing is being observed at 24,000 and 25,000 levels. This indicates a trading range established between 24,800 and 25,800, with a more immediate focus on 25,000 and 25,500 levels.
Nifty 50 Forecast
The Nifty 50 index suffered a substantial drop on October 4, closing below the 25,300 mark. Analysts anticipate a dead cat bounce from current levels or around the 25,000 threshold, albeit likely to be short-lived. If the index closes at or below 25,500, it may trigger a further decline towards 24,800, as momentum indicators convey weakness.
Options data reflects a trend of increasing call writing for the current month’s expiry above the 25,500 level, corroborating the anticipated continued weakness in the index.
According to Aditya Agarwal from Sanctum Wealth, traders should brace for a weak outlook for Nifty 50. He states that any uptrend towards 25,450 – 25,500 could prompt traders to exit long positions and establish fresh short positions. In this volatile landscape, selling pressure may persist, possibly dragging the index to around 24,800 levels.
In light of the negative market outlook, VLA Ambala, Co-Founder of Stock Market Today, advises investors to hedge their portfolios while suggesting that traders adopt a ‘sell high’ strategy. The formation of a bearish candlestick pattern suggests the potential for further declines, with the Nifty likely to find support between 25,040 and 24,950 and encounter resistance between 25,290 and 25,320.
Bank Nifty Outlook
Bank Nifty also faced heavy losses, dropping 1,077.40 points, or 2.04%, to close at 51,845.20, forming a bearish candlestick pattern. Analysts indicate that Bank Nifty has breached its support level at 52,800, signaling potential further downside.
Momentum indicators for Bank Nifty suggest a possible rebound from support around 51,300 which correlates with the 20 EMA. However, options data indicates increased writing above the 52,000 level, signifying persistent weakness.
Agarwal highlights the negative short-term outlook for Bank Nifty, projecting a potential drop to the 51,500 – 51,200 range, while any recovery towards 52,460 – 52,740 may be used by traders to reduce long exposure and initiate fresh short sales.
Disclaimer: The perspectives and recommendations outlined above reflect the views of individual analysts or brokerage firms and do not constitute investment advice from Mint. Investors should consult qualified experts before making any financial decisions.
