The market started strong but ended with a notable decline. Last week, the Nifty gained 238.80 points or 0.97 percent, while the BSE Sensex increased by 0.88 percent. The Nifty Midcap-100 and Smallcap-100 indices rose by 1.99 percent and 2.12 percent, respectively. Sector-wise, Nifty Auto was the leading gainer with an increase of 5.02 percent, followed by Consumer Durables at 3.91 percent. Realty, FMCG, and IT sectors also saw solid gains ranging between 1.74 percent and 3.45 percent. However, the Bank Nifty and FinNifty experienced slight declines of 0.35 percent and 0.06 percent, respectively. The India VIX fell by 5.08 percent, settling at 11.73. Foreign Institutional Investors (FIIs) sold equities worth Rs.
25,751.02 crore this month, while Domestic Institutional Investors (DIIs) purchased Rs. 66,183.51 crore worth. The Nifty formed a shooting star candle on the weekly chart, indicating distribution as volumes were higher. The index reacted from the 61.8 percent retracement level of the previous decline, starting the week with a significant gap up but closing at the week’s low. It managed to maintain Monday’s gap but closed below both the 10-week average and the 50-day moving average. As previously noted, the index faced resistance between the 25,100-25,160 zone, which corresponds to a 61.8 percent retracement of the earlier decline. It also fell below the 23.6 percent retracement level of the recent upswing.
The immediate support lies at the 38.2 percent retracement level of 24,841, with further support at the 20-day moving average of 24,730 and the 50 percent retracement level at 24,745. These levels are critical for now. Following Federal Reserve Chairman Jerome Powell’s speech at Jackson Hole on Friday night, which suggested a potential rate cut in September, global equity markets responded positively, with the Dow Jones Index reaching a new all-time high with a 1.89 percent increase. The NASDAQ-100 and S&P-500 also rose by over 1.50 percent, and the Gift Nifty gained 121 points. Powell’s comments led to a decline in the U.S. dollar index, making emerging market equities more appealing and potentially enhancing FII flows into markets like India.
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Domestic benchmark indices are expected to open significantly higher, with interest rate-sensitive sectors such as BFSI, Real Estate, and Capital Goods likely to be in focus. However, caution is advised, as Powell emphasized the need for careful progression without committing to specific timelines or sizes for cuts. After a gap up opening around 25,000, the index must sustain above the first hour’s high. A close above 25,154 would be favorable and could restart an upward trend. In an optimistic scenario, the Nifty should continue to rise beyond 25,222, potentially leading to new highs over the next two to three months.
The weekly and daily RSI remains in neutral territory at 50-55; if it crosses into the bullish zone above 60, along with prices moving past 25,222, it would signal strong bullish momentum. The MACD indicates a reduction in momentum. With the -DMI above the +DMI, this presents a negative sign. Although the ADX line remains above 25, it is on a decline, which is concerning. Next Wednesday marks a holiday for Ganesh Chaturthi, allowing only two trading sessions before the monthly expiry, making rollovers critical. Monitor behavior within the 25,100-24,730 zone as movement beyond this range may signify a strong directional shift. Focus on Banks and Financials.