Technical View | Nifty ends lower, experts say 18,000 will be the decisive level

The Nifty traded in negative terrain throughout the session and closed half a percent lower on February 17, tracking weak global cues.

The US dollar index jumped to a six-week high amid rising expectations for more rate hikes after hawkish commentary by Federal Reserve officials.

The Nifty has formed a small-bodied bearish candle with long upper-lower shadow on the daily charts, indicating the tug of war between the bulls and the bears.

It slipped below the 50-day exponential moving average (EMA) of 17,964 but managed to hold the falling resistance trendline adjoining the highs from December 1, 2022 and January 24, 2023. It also took support at 17,900.

On the weekly scale, the index formed a small-bodied bullish candlestick with a long upper-lower shadow, indicating indecisiveness among buyers and sellers about the market trend.

Indian markets ended the latest week on a bearish note. Sensex closed at 61,002.57 lower by 316.94 points or 0.52%. While Nifty 50 finished at 17,944.20 below 91.65 points or 0.51% on Friday.

Overall, in the week, Sensex has climbed by nearly a percent while Nifty 50 has jumped by over 0.6%.

Going ahead, Dr. Joseph Thomas, Head of Research, Emkay Wealth Management said, “The equity market continues to test support levels influenced by the developments abroad, mainly the US, and inordinately led by data points on inflation. The persistence of inflation points to a status quo on the policy stance, and this is affecting markets due to an assessment of growth prospects which is not entirely favourable. The very same factors are likely to guide the markets movements in the coming weeks too.”

According to Mitul Shah – Head of Research at Reliance Securities, the aggregate results for the sample of NSE 500 companies so far have seen Revenue/EBITDA/PAT growth of 19%/ 11%/ 5% YoY. Profitability has been under pressure due to elevated raw material costs on a YoY basis. RM costs though have cooled off on a QoQ basis leading to improvement in gross margins. PAT growth has been impacted due to higher finance costs on the back of an increase in interest rates.

As long as the index holds these levels, consolidation will continue in the coming sessions, with resistance at 18,100-18,200, experts said.

“The Nifty has fallen to the upper band of the falling channel on the daily chart. The trend for the near term is likely to remain sideways to positive as long as it remains above the falling channel,” Rupak De, Senior Technical Analyst at LKP Securities said.

A recovery is likely if the Nifty stays above 17,880, the day’s low. On the higher end, 18,150 will likely act as resistance, the market expert said.

On the monthly Options front, the maximum Call open interest was at 18,000 strike followed by 18,500 strike and 18,100 strike, with Call writing at 18,000 strike, then 18,500 strike.

On the Put side, the maximum open interest was reflected in 18,000 strike followed by 17,500 strike and 17,800 strike, with writing at 17,900 strike, then 18,000 and 17,800 strikes.

The data indicates that 18,000 will be the crucial level to watch in the coming sessions, with support at 17,800 strike and the resistance at 18,100 strike.

Banking index

The Bank Nifty opened on a negative note. It remained under pressure and breached the crucial support of 41,200-41,000 to slip to the day’s low of 40,883 later in the day.

The index saw its lowest closing in 10 sessions, ending at 41,132, down 500 points. It formed a bearish candle on the daily and the weekly scales.

“We have seen underperformance in the banking index and now as long as it holds below the 41,250 area, the weakness can be seen towards 40,750 and then 40,600 levels, whereas on the upside, the hurdle is expected to be at 41,500 then 41,750 levels,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

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