India’s Nifty 50 Index declined by half a percentage point on Wednesday, weighed down by sentiment in US stock markets. The Index gained a single point on Tuesday, but was down by 118 points at the time of writing, as investors reacted to the sharp decline in US stocks, underpinned by the S&P 500’s loss of 2.2 percent and the Dow Jones Index’s drop by 1.5 percent.
Tech giant Nvidia (NASDAQ: NVDA) was the poster child of Tuesday’s downturn, with its stock going down by 9.53 percent and wiping out $279 billion worth of its market value- the largest single-day loss by a US company in recorded history. The virulent effect of that decline was sent across the Atlantic, where the FTSE 100 and CAC 40 Indices were down by 0.8 percent, and the DAX Index was at -0.7 percent at the time of writing.
The Nifty 50 index (INDEXNSE: NIFTY_50) has a significant portion of Foreign Institutional Investors (FII), with the value of FII in Indian equities markets standing at $206 billion as of mid-July 2024. Therefore, losses in the US and European markets will have an inevitable drawback on Indian stocks.
That said, many investors are counting on the imminent Fed interest rate cuts in mid-September for a possible turnaround in the current market momentum. Meanwhile, the Indian economy stays on the growth path, with the August HSBC Indian Services PMI reading released on Wednesday coming at 60.9 percent to beat the forecast figure of 60.4 percent. That will provide some support to the Nifty 50 Index.
The momentum indicators on the Nifty 50 index signal bearish trajectory. The price is below the Volume Weighted Moving Average (VWMA), and the 25,215 points mark presents a potential psychological barrier. Also, the Money Flow Index reading at 36 denotes negative money flow, adding support to the downside momentum.
On the 30-minute chart, the pivot will likely be at 25,200, and the downside will likely prevail if resistance persists at that mark. That will likely set the first support at 25,138, but extended control by the sellers will enable a breach below that mark to test 25,072.
On the other hand,a move above 25,200 will put the buyers in control and favour the upside. If that happens, we are likely to see the first resistance coming at 25,272. However, a stronger upward momentum could clear that hurdle, invalidate the downside narrative, and test 25,335. That said, the Bollinger Bands are widening, signaling potential volatility.
This post was last modified on Sep 04, 2024, 11:17 BST 11:17