8 hours ago
If there was a definition of a forgettable week, the Nifty bulls would put the last one right on top of the list. From the September 18 high of 25,448, the index has given up 800 points, or 80% of the 1,000-point rally that it witnessed from the lows of August 29.
IT has been the pain point of the week for the Nifty. The six-day fall in India's biggest technology companies has resulted in a wipe out of over ₹2 lakh crore in market cap, that is nearly 12.5% of the ₹16 lakh crore that the market lost overall in the week gone by. TCS has contributed to 50% of that ₹2 lakh crore market cap loss, falling to a 52-week low and has delivered zero returns in the last three years.
If IT was not enough, Friday added Pharma to the mix with Donald Trump's tariff announcements. The sector was among the top underperformers on Friday, with stocks like Sun Pharma falling to a 52-week low.
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The Nifty now heads into a make-or-break week. Of course, developments around tariffs continue to be in focus, but there are multiple other newspoints to watch out for. First, the quarter comes to an end on Tuesday. Companies will begin to release their business updates for the quarter gone by starting Wednesday. Leading that list will be the auto companies.
Such has been the hype around auto stocks after the GST reforms that these stocks have run up anywhere between 15% to 20% in the last one month. Most of them, Maruti Suzuki, Eicher Motors, Hyundai Motor India, M&M are either trading close to, or at record high levels. It remains to be seen if the numbers can justify the run-up. More than auto stocks, it is auto ancillaries that have seen a move over the last two weeks. Smaller names like RACL Geartech, Automotive Stampings and Assemblies, Munjal Auto, all gained between 15% to 30% just last week.
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Next up are the FMCG names, the GST rationalisation is likely to result in a consumption boom, and just before that, HUL came out with an update on Friday, stating that it is likely to see a subdued performance in the ongoing quarter, and the impact is likely to continue in October as well.
While business updates begin to trickle in from Wednesday, Thursday is a market holiday, and just before that, the Reserve Bank of India comes out with its monetary policy on Wednesday. The street though, remains divided on whether the Monetary Policy Committee should go ahead and deliver one more cut, or maintain a status quo.
Key Levels To Watch
With the Nifty on a six-day losing streak, it now looks for support at lower levels. 24,650, where it closed on Friday will be the first line of defence, but a move below that can being in the September 5 low of 24,621, followed by the September 3 low of 24,533 and then bring in the lows of the current rally, the August 29 low of 24,404. On the upside, 24,800 will be the first level to cross for the index, before a move back towards the 25,000 mark.
The Nifty Bank, which was the key contributor to the 1,000-point Nifty rally, has also been instrumental in the decline, along with IT stocks. The index has declined over 1,400 points from the highs of the recent rally, which took it past the 55,700 mark, but it could not sustain those levels. Not just that, the index is now below the 55,000 mark, and even the psychological support level of 54,500. That will be the first important level on the upside to watch, in case there is a bounce from oversold levels.
What Are The Chartists Saying?
Friday's breach of the 20 and 50-Day Exponential Moving Average signals continued weakness over the short-term as well as for the broader market sentiment, said Vatsal Bhuva of LKP Securities. He expects the undertone to remain bearish till the Nifty remains below the 25,000 mark. The next level on the downside is the 200-DEMA, which is placed at 24,400 levels.
"Weakness in heavyweights has accelerated the decline, with the index now approaching key support near the 200 DEMA at 24,400, followed by 24,000–24,200. On any rebound, the previous support at 25,000 (20 DEMA) will act as a strong resistance," Ajit Mishra of Religare Broking said.
