It was another disappointing week of trade for NIFTY, as prices continued to decline, with the losing streak now extending to the fifth consecutive week. While the week began on a muted note, selling pressure accelerated as the week progressed, particularly during the first three trading sessions. Thereafter, some resilience among buyers on the penultimate day helped cap the losses, while a smart intraday recovery on the final day, following a significant gap-down opening, helped recoup all of the overnight losses. The index eventually settled at the 23398 mark, registering a weekly loss of 2.09%.

While the technical setup and trend continue to remain fragile and aligned to the downside, the recovery observed during the final trading session, coupled with prices approaching the crucial 23200–23000 support band, suggests that a near-term bounce cannot be ruled out. A multitude of factors underscore the possibility of an upcoming bounce. Most technical indicators are now pointing towards oversold readings, reducing the likelihood of an extended decline from current levels. At the same time, breadth indicators, which track the overall health of the market, highlight the extent of the ongoing weakness, with more than 80% of stocks in the NIFTY 50 basket and nearly 70% of stocks in the NIFTY 500 currently in a downswing. In such a scenario, with prices approaching key support levels and market breadth showing significant deterioration, we anticipate a short-term bounce in the coming sessions. That said, such a recovery should not be construed as a trend reversal. A meaningful reversal in the broader trend, at this point, still appears to be a far-fetched possibility. In terms of levels, the 23450–23500 band is likely to act as an immediate hurdle, followed by a stronger resistance zone at 23600–23650, which had previously acted as support. On the downside, the 23200 level, marked by the current weekly low, is likely to provide an immediate cushion, followed by stronger support in the 23100–23000 band. This zone is significant not only as a prior swing low but also as a key psychological support level.

While the broader markets have encountered intense selling pressure over the past couple of weeks, a notable pocket of strength has emerged in the Small Cap and Microcap space, which has remained relatively resilient and has not witnessed any meaningful profit booking during this period. Exploring opportunities within this universe, while maintaining a strict focus on risk-reward parameters, could offer the potential to generate superior returns going forward.

Key levels to watch

NIFTY

Support: 23200- 23000

Resistance: 23450- 23650

BANKNIFTY

Support: 55700– 55800

Resistance: 56800– 57000

Hitesh Rathi, Technical Analyst -Equity & Derivatives, Angel One.