By V K Sharma
The Nifty shed 0.53% for the week to close at 24,837. This marked the fourth consecutive weekly loss for the markets. To top it off, the Nifty closed below its 50-day exponential moving average (Dema) — the first such close since April 11, 2025. The only consolation: the close is also below the recent swing low of 24,882 made on July 21.
Nifty’s performance
The benchmark has now been consistently forming lower tops and lower bottoms — a clearly bearish pattern. The oscillators are also showing bearish signals. While the markets may be termed oversold, there is still room for further decline. One will have to wait for a positive divergence to emerge before gaining confidence.
After making a low of 21,743 on April 7, 2025, the Nifty rallied to a swing high of 25,669 on June 30 — a move of 3,926 points.
So, where could the Nifty find support? One could look at possible Fibonacci retracement levels for guidance. The first retracement level of 23.6% comes at 24,742. The next level to watch would be the 38.2% retracement, which could offer support around the 24,170 level. On the upside, the Nifty must close above 25,246 to form a higher swing high and resume the uptrend.
Comparison to US Markets
Our markets are underperforming the US markets. While the Nifty is up just 14% from its April lows, the S&P 500 is 28% higher and the Nasdaq a solid 38% higher. While we have been in a four-week correction, they continue to hit fresh highs.
The reason for US outperformance is twofold: first, the actual trade agreements reached so far have imposed lower tariffs than initially feared; second, corporate earnings have exceeded expectations. In fact, 82% of the companies that have reported so far have beaten estimates.
The FOMC — the policy-making arm of the US Federal Reserve — meets on July 29 and 30 to decide on interest rates. It is widely expected that the wise men of the US. Fed will keep interest rates within the current target range of 4.25% to 4.5%. Markets are pricing in two quarter-point rate cuts this year, with the first likely at the September meeting.
Though monsoon precipitation has been 5% above normal so far, wide regional disparities remain. That said, acreage is better than last year due to early rains.
India will slowly-slowly catch the trade monkey. India has been patient and transparent in its trade dealings. We are a country with internal consumption and a large trained workforce. We will do what is best for the country. The current market levels are discounting a tough deal for India, which is unlikely to be the case.
(The writer is a technical analyst and former head of clients’ group HDFC Securities)
