Can Nifty crash to 24,000 amid West Asia crisis? Here's what chart suggests

The Nifty can test 24,400 levels on the downside; MidCap, SmallCap indices can fall up to 7 per cent, cautions Kunal Shah, Senior Technical Analyst of Mirae Asset ShareKhan.

The Indian stock market seems poised for a gap-down start on Monday following the escalation of the Iran-Israel conflict in West Asia, analysts believe. The GIFT Nifty hinted at a near 200-point gap-down trade.  "Medium-term impact on the market will depend on how long the conflict will last. We don't know the answer to this question. After crippling Iran, the US and Israel may make a strategic withdrawal," says Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited.  Analysts also caution that a trading holiday on Tuesday coupled with the weekly Nifty expiry could add to traders' woes today.  "Today's weekly Nifty expiry - ahead of the Holi market holiday tomorrow - could intensify volatility. The combination of geopolitical stress and expiry-driven positioning is expected to amplify intraday swings, keeping traders cautious and reactive to global headlines," says Hariprasad K, SEBI-registered Research Analyst and Founder at Livelong Wealth.  READ | Iran-Israel-US war: Nifty may test 24,500, cautions Emkay; where to hide?  Meanwhile, Following Friday's sharp sell-off, the key Indian stock market benchmark indices have flagged a bearish signal on charts, say technical analysts.  On Friday, the Nifty 50 index crashed below the 200-day Simple Moving Average (SMA) and the 200-day Exponential Moving Average (EMA) - a key technical indicator that helps determine a bullish and bearish trend.  In general, stocks or indices quoting above the 200-day averages are considered bullish and vice versa. 

Technical outlook on Nifty

Kunal Shah, Senior Technical Analyst at Mirae Asset ShareKhan decodes the technical charts of Nifty and broader indices, and flagging up to 7.3 per cent downside risk going forward.

Nifty

Last close: 25,179 

 

 

  The breach of the 200-day Exponential Moving Average (EMA) is perhaps the most significant development here. Historically, the 200-EMA serves as the "line in the sand" between a bull and bear for markets, says Kunal Shah.  The analyst explains the key levels for the Nifty as follows:  Major Resistance (25,800): This has become a "ceiling." Multiple attempts to sustain above this level have failed, confirming a distribution phase where big players are offloading positions.  The Breakdown Point (25,250): Previously a fortress of support (and the 200-EMA location), this level will now likely act as immediate resistance on any relief rally.  Downside Targets (24,700 / 24,400): With the primary support broken, the index is gravitating toward these zones, which represent previous consolidation bases and psychological round numbers.  According to the analyst, the Nifty may test 24,400 on the downside - this implies a downside risk of 3.1 per cent from Friday's close.

Nifty MidCap 100

Last Close: 59,116 

 

   "The Nifty MidCap Index is currently trapped in a bearish price pattern characterized by Lower Highs, suggesting that every attempt to recover is being met with aggressive selling by institutional players, explains Shah.  The Critical Floor (58,400)  The 58,400 level is of paramount importance as it coincides with the 200-day EMA. The analyst from Mirae Asset ShareKhan belives that if the MidCap index breaches 58,400, it loses its long-term structural support.  A breach, the analyst warns could lead to a "sharp sell-off" as stop-losses of long-term investors get triggered, potentially dragging the index down to the 56,000 zone. This translates into a 5.3 downside risk for the MidCap index.  The Trend Reversal Trigger: For the bearish sentiment to shift back to bullish, the index must decisively cross and sustain above the 60,300 mark.

Nifty SmallCap 100

Last Close: 16,929 

 

  The Nifty Smallcap 100 index is currently navigating a high-stakes "make or break" zone. The technical structure is increasingly bearish, characterized by a persistent lower high formation that signals intense selling pressure on every recovery attempt, says the analyst.  Shah believes that the index has a crucial immediate support at 16,800. The analyst, however, cautions that a decisive breach below this floor is expected to trigger a sharp sell-off toward the 15,700 mark - implying a 7.3 per cent downside risk.  Conversely, the SmallCap index needs a strong breakout above 17,500 to neutralize the bearish bias and reverse the trend, says Shah.  Disclaimer: The views expressed by the brokerage/ analyst in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.