Is there more pain ahead for Nifty 50 after a 2.2% drop in 3 sessions? Here’s what analysts say

The sell-off pressure observed in the mid- and small-cap stocks over the last few sessions amid regulatory concerns regarding excessive inflows has spread to the large-cap stocks.

In today’s session, the Nifty 50 index experienced a significant decline of 1.51%, dropping below the 22,000 mark to reach 21,997 points. This marks the index’s third-largest intraday drop so far in 2024.

Out of the 50 constituents of the index, 44 ended today’s trade in the red. Stocks like Power Grid Corporation of India, Coal India, Adani Ports & Special Economic Zone, Adani Enterprises, NTPC, Tata Steel, and ONGC saw losses of over 5%.

Moreover, the market was also influenced by the uptick in US inflation to 3.2% in February, raising concerns about the possibility of a rate cut by the US Federal Reserve in the near term. This, however, boosted the dollar index, and even the US stock market surged.

Also Read: Sensex, Nifty 50 fall over 1% each; why did Indian stock market fall today?

Nevertheless, the domestic market seems to be viewing this negatively because prolonged high interest rates could deter foreign capital inflows into emerging markets like India, affecting them adversely.

On the sectoral front, Nifty Metal was the biggest laggard, down 5.69%, followed by Nifty Media (down 5.62%), Nifty Realty (down 5.32%), Nifty Oil and Gas (down 4.87%), Nifty PSU Bank (down 4.28%), and Nifty Auto (down 2.84%). Only Nifty FMCG ended in the green.

Moreover, today’s decline has led to a 2.2% correction in the Nifty 50 over the last three trading sessions. As per analysts, the index is poised for further decline in the near term.

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Rupak De, Senior Technical Analyst, LKP Securities, said, “The Nifty has experienced a breakdown from a rising channel on the daily chart, signaling the conclusion of the previous uptrend and the potential beginning of a downtrend. Additionally, the index has descended below the recent consolidation phase on the daily timeframe, further emphasising the increasing weakness.”

“The Relative Strength Index (RSI), with a period of 14, is showing a bearish crossover and has dropped below the 50 mark. In the short term, the index may continue to be susceptible to selling pressure, with resistance anticipated around 22,250. On the downside, support levels are positioned at 21,800 and 21,700,” De pointed out.

Also Read: Nifty Smallcap 100 index slides 5.3%, 98 stocks close in the red

According to Mr. Rajesh Bhosale, Technical Analyst at Angel One, the index’s near-term resistance is anticipated around the 22,200–22,250 range, while immediate support lies near the 50EMA, situated between 21,850 and 21,800, followed by a swing low at 21,500.

“While sharp market declines often disregard key supports, the weekly expiry may influence these levels. Given the expected heightened volatility, traders are advised to avoid undue risk and utilise the mentioned support and resistance levels for trade setups,” he further added.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions