After the benchmark, the index formed a bearish divergence at the top, a negative view was formed which remains valid until the index breaches the divergence top and negates it. To this day, the high of 18,088.3 is intact and hence every rise is proving to be a good selling opportunity for traders.
Today, the Nifty 50 closed below the support of 17,400 for the first time after 29 August 2022 which again conforms to the bearishness prevailing in the market. Till now, this level was intact and every dip near this level was faced with high demand but it seems like investors are finally giving up.
The level of 17,200 has become more approachable than before amid today’s weak closing, which I discussed in last week’s analysis of whether the level of 17,200 would come first or 18,100. Although for the current monthly expiry, the data was pointing out to be a range-bound move with high volatility, today’s weakness might throw some surprises in the next week.
Image Description: Daily chart of the Nifty 50 (spot) with RSI at the bottom
Image Source: Investing.com
More importantly, in today’s fall, even the banking space has given up big time, which was the major pillar of the previous rally. The index ended the session 2.62% down while the index lost 3.97% by the closing. Even the FMCG sector which provided investors a place to hide in yesterday’s weak session and is considered to be a defensive sector also fell 0.5% today. The heavyweight Reliance (NS:) also took a steep cut of 1.87% to INR 2,439.5.
The market-wide weakness is a very strong signal for an imminent downtrend. One of the major spoilers to the party for the bulls is definitely the record plunge of the Indian rupee against the US dollar after the US Fed’s 75 bps on 21 September 2022. After yesterday’s gigantic plunge of the rupee, the weakness continued today as well with an all-time low of around 81.33. That reflects a peak gain of around 1.43 in in a mere two sessions. The last time we witnessed a similar decline in the rupee was on the day Russia declared a war on Ukraine, on 24 February 2022. If we don’t see stability in the rupee, then a further weakness in the Indian markets gains more credibility.
The has shot up by a massive 9.4% and closed above the 20-mark, at 20.59. It is the highest closing since 5 July 2022. This clearly reflects, traders are in for some more volatile moves in the coming days. Another big event that is coming up shortly is the RBI’s 3-day MPC from 28 – 30 September 2022 which would be closely watched by traders and the volatility is expected to remain high till the RBI’s decision on the rate hike.