The prolonged weakness in the Indian stock market is evident in the broader market breadth, as a significant portion of stocks fall below their long-term moving averages. The 200-Day Simple Moving Average (DSMA), considered a key long-term benchmark, is signaling a negative bias for most stocks trading below this level. As of Friday, 316 out of the Nifty 500 stocks (63%) have slipped beneath this threshold, reflecting the overall bearish sentiment.
This bearish trend is also reflected in major indices. Specifically, 31 out of the Nifty 50 stocks are trading below the 200-DSMA, while in the Nifty MidCap 150 and SmallCap 250 indices, 95 midcaps and 144 smallcaps are underperforming relative to their long-term averages.
The Nifty 50 index recently touched a low of 23,344, marking a decline of 0.8% at its lowest point during the day. The index has remained below its long-term moving average for the past five trading sessions, with the current 200-DSMA standing at 23,907. Technical analysts, including Sameet Chavan from Angel One, believe the Nifty is testing crucial support levels around 23,500 – 23,450. If this support breaks, further downside could be expected, with a potential drop towards 23,200 – 23,000. Immediate resistance is seen around 23,700 – 23,750, with a stronger barrier at 23,900 – 24,000, near the 200-DSMA.
On the global front, analysts are concerned about the potential impact of protectionist measures from the new US leadership and ongoing economic challenges in China. These factors, along with a strengthening US dollar, are contributing to market uncertainty. G Chokkalingam, founder of Equinomics Research, points out that such global conditions may lead to volatility in global markets, which could impact Foreign Institutional Investor (FII) inflows into Indian markets, potentially exacerbating the current bearish trend.
