Nifty 50 Closes Below Nearest Support; What Next?

As the war between Israel and Iran intensified, global markets across the world reacted with a sign of caution. Investors are now looking to ditch their risk-on approach which is clearly evident in the previous two sessions.

After a 234-point cut on Friday, the benchmark index fell another 246 points on Monday, closing the session at 22,272.5. The fall itself is not the problem, but the level that has been breached.

The nearest support of 22,300 has decisively been breached today, with the index even giving a firm closing below it. No more confirmation is required for the trend to turn from the previous bullish to somewhat neutral now.

I am still not very bearish on the index, as long as it stays above the major support of 21,700 – 21,800. The bad news – a hotter-than-expected US CPI of 3.5% and now the escalated Israel & Iran conflict seem to be discounted in price. The Nifty 50 index has already taken a hit of around 503 points from the all-time high, in a mere 2 sessions.

Any further movement will now majorly be dictated by the ongoing earnings season. TCS (NS:) for eg didn’t impress much from its Q4 FY23 earnings and fell 1.5% today, contributing a 0.06% fall in the index. The entire IT pack was in the red taking cues from TCS. Hence, traders should now shift their focus on the upcoming results.

Coming back to Nifty 50, the next strong support is resent at 21,700 – 21,800. Because the immediate support is broken now, the index might try to reach the next one which could result in an approx 500-point fall from the CMP. But that’s about it. I don’t think there is any more potential at this point.

The underlying bullish tone has definitely now been changed to more of a neutral one. Due to a lack of directional cues, buying the dip and selling the rise could be a good strategy here.

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X (formerly, Twitter) – Aayush Khanna