Fault lines of fear threaten to fracture equity market's fragile core

Seismic shifts in sentiment call for a cautious, sell-on-rise approach: Analysts

The benchmark Nifty 50 has recorded its third consecutive weekly decline and remains exposed to further losses as critical support levels have yet to be tested, according to technical analysts.

 

The 50-share blue-chip index closed at 23,092 on Friday, shedding 913 points, or 3.8 per cent, over the past three weeks.

 

The Nifty 50, which has been trending lower, is expected to encounter strong resistance in the 23,450–23,650 range, said Ajit Mishra, senior vice-president of research at Religare Broking.

 

Last week, broader markets took a larger hit, with the Nifty Smallcap 100 index falling 4.1 per cent, while the Nifty Midcap 100 dropped more than 2.5 per cent.

 

“The disconnect between the benchmarks and broader market performance is a growing concern, as selective buying in largecap stocks has cushioned the decline, while midcap and smallcap stocks continue to face sharp corrections,” Mishra observed.

 

The Nifty 50 is down 12.6 per cent from its peak in September, with the Nifty Smallcap 100 and Nifty Midcap down 13.7 per cent and 12.1 per cent, respectively.

 

Rajesh Bhosale, a technical analyst at Angel One, predicts continued volatility in the markets. The price movements since September have formed a ‘falling wedge’ pattern. 

 

“Since January 13, the index has been trading within a defined range, with any rebound towards 23,400 facing resistance. For the bulls to gain traction, this level — which also coincides with the 20-day exponential moving average — must be breached,” he said.

 

Over the past two weeks, the Nifty has attempted to hold above 23,400, but sustained selling by foreign portfolio investors (FPIs) has prevented the index from maintaining these gains.

 

So far this month, FPIs have sold nearly Rs 59,000 crore worth of shares. If outflows continue, this could become the second-largest monthly FPI withdrawal in history, following October 2024, when overseas investors pulled out nearly Rs 92,000 crore.

 

Dhupesh Dhameja, derivatives analyst at Samco Securities, believes persistent FPI selling is obstructing any upward momentum.

 

“The 23,300–23,350 zone remains a formidable resistance level, reinforced by heavy options activity,” Dhameja said.

 

Analysts recommend traders adopt a stock-specific strategy and consider hedged positions, especially with the upcoming Union Budget and ongoing uncertainty around US President Donald Trump’s policies.

 

A sell-on-rise approach may be preferred as long as resistance levels hold, while a break below 23,000 could exacerbate selling pressure, they add.