We had gone in last week, anticipating a turn lower in Nifty 50, pointing out the completion of the upside leg near 25,400-25,600, which also coincided with the formation of an evening star, a bearish candlestick pattern.
Seven consecutive days of downsides that followed do point to a peaking of fear supporting expectations of mean reversion, especially with a vast majority of stocks having slipped below the 20-day SMA in a short time span.
While 24,500 and then 24,335 are near-term supports, the 200-day SMA at 24,167 is a key moving average. It stayed intact during August’s bear attack and would be a key level to watch.
VIX rises, but volatility expectations continue to be low.
An extended period of decline has prompted traders to raise their volatility expectations, but a VIX near 11, despite seven consecutive days of fall, is hardly an indicator of fear. We had pointed out last week as well regarding the unpreparedness of a surprise that comes with VIX persisting at low levels for an extended period.
So for now, all we have is a certain expectation of fluctuation, but not a pointer towards large downsides, at least as far as what VIX is trying to project. That said, systematic declines bereft of major falls can unfold with VIX continuing to be at low levels.
Sectoral cues
Only 8.6% of Nifty 500 constituents are now trading above the 10-day SMA, pointing to the sustained nature of the downtrend. This move has also pushed 68% of its constituents below the 50-day SMA, suggesting that the broad trend has also turned bearish for the large majority of stocks.
Incidentally, none of the Nifty IT index stocks are trading above their respective 50-day SMA, a stark contrast to just a week ago, when 90% of them were trading above this key SMA.
Metals on a high
The Nifty Metal Index seems to have wrapped up its month-long rally, with a weekly Shooting Star candle signalling a potential trend reversal. On the daily chart, technical indicators are flashing caution: the MACD is nearing a bearish crossover below the signal line, and it has already slipped beneath the RSI moving average—both pointing to increasing weakness.
In the near term, the index is likely to test support around 9,790, which aligns with the 38.2% Fibonacci retracement level, followed by 9,757 at the Supertrend threshold. If selling pressure intensifies, a deeper correction could take it down to 9,667, marking the 50% retracement level derived from the August low to the September high.
On the stock front, names like Adani Enterprises, Jindal Steel, JSW Steel, Tata Steel, and Lloyds Metals have all printed bearish Marubozu or reversal candles, indicating they may continue to weigh on the index in the coming sessions.
Financial Services: Signs of stabilisation
The Nifty Financial Services Index is shaping up to deliver a mixed performance this time around. While the index has slipped below the Supertrend threshold of 26,720 and closed beneath it, it continues to hold above the critical 61.8% Fibonacci retracement level of 25,970—calculated from the September 2025 high and low.
In the banking segment, HDFC Bank stands out with relative strength, whereas peers such as ICICI Bank, SBI, Kotak Bank, and Axis Bank appear susceptible to further declines.
Meanwhile, pure financial services stocks—already under pressure from profit booking—are likely to face continued downside. This group includes Bajaj Finance, Bajaj Finserv, Shriram Finance, Chola Finance, and Muthoot Finance, all of which show an average 14-day RSI near 60, suggesting more room for correction.
Conversely, insurance players like SBI Life, HDFC Life, and ICICI Lombard are beginning to show signs of stabilisation and could attract fresh buying interest in the upcoming week.