The fear mounts on D-Street as the Nifty 50 benchmark index has dropped over 1,400 points from its recent high of 26,373. With the Union Budget coming up, traders and investors are once again unsure of what to do.
Screens turn red, WhatsApp groups fill up with opinions, and the question arises – “Is this the start of something bigger or just another stop on a long journey?”
A famous trader named Jesse Livermore once said, “The stock market is never obvious.” This quote fits this moment perfectly. Most of the time, it tricks most traders.
And that’s why experienced traders don’t buy or sell based on fear or excitement. They put their money into things based on what the charts and data show them.
Let’s take a step back and look at the Nifty50 constituents to see how strong the market is on the inside before we get into the index itself. Sometimes, the real story isn’t in the headline number, but in what the whole group of stocks is doing under the surface.
The 10MEMA: The Market’s Backbone
Forty-five out of fifty Nifty50 stocks are trading above the 10EMA (10-period Exponential Moving Average) on the monthly chart. This isn’t just a number; it’s a sign of how strong the long-term trend is.
Long-term investors often use the 10EMA on a monthly chart to show that the main trend is still going strong, even if there are short-term corrections. You could say it’s the market’s backbone. The bull trend will stay healthy as long as this level stays the same.
On the other hand, if the price goes below this line, it usually means that the trend is getting tired or that the market is consolidating more. For now, the fact that 90% of the index’s components are still above this level suggests that fear may be louder than the actual damage on the long-term charts.
Golden Cross: 94% of Stocks Signal Strength
A Golden Cross is a bullish sign when a shorter-term moving average, like the 50-period, goes above a longer-term average, like the 200-period. Traders often think that this means that the bulls are gaining momentum and that a bigger uptrend may be starting.
About 94% of the stocks on the weekly chart are trading in a Golden Cross structure. That is a strong sign of a bullish bias over the medium term. Even after the recent correction, 35 out of 50 stocks, or 70%, still have a Golden Cross on the daily chart. Even though the index has gone down, most stocks haven’t broken their main trend structure yet.
Nifty50 Technicals: Support at the Channel
The index is now trading close to the support of a rising channel, which is a place where buyers have historically stepped in.
The Spinning Top candlestick pattern makes things even more interesting. This pattern shows that traders are unsure about what to do; neither the bulls nor the bears are in charge. But it also suggests that the index could turn around if it breaks through the recent swing high of about 25,300.
The 200DEMA moving average channel signals the demand there. This is where traders who are in it for the long haul often look for chances instead of exits.
The RSI has gone too far into oversold territory on the momentum side. Being oversold doesn’t mean that the price will bounce back right away, but it does mean that selling pressure may be getting weaker.
Since the price is at support and momentum indicators are cooling off, a bullish reversal is still possible, especially if support from other sectors comes in.
Sector Watch: Banks and IT Lead the Reversal
Banking and IT stocks make up almost 34% of the Nifty50. In short, these two sectors don’t just follow the trend; they often set it.
Nifty Bank: Strong Leadership
The BankNifty/Nifty50 ratio line is at its highest point in 27 months, showing that banking stocks have done much better than the market as a whole. This kind of relative strength is often a sign of a healthy market structure.
Nifty Bank has been following a classic pattern of breakout, retest, and trend resumption on the weekly chart. This is a structure that trend followers are convinced to trade.
The 21WEMA moving average channel has also been a demand zone since 2023. The index has entered this zone again, which could mean that long-term investors see this phase as an opportunity instead of a threat.
Nifty IT: Bulls Buying the Dip
The IT sector is a very important part of the Nifty50, making up about 14% of it.
The Nifty IT chart shows that the index is finding buyers in its support zone, which is in line with the 21WEMA demand channel that has been guiding the trend since 2020. This consistency shows that institutions believe in the long-term story.
If the price breaks above the minor resistance level near 39,530, it could start a bullish trend and add to the overall index.
Charts vs News
Changes make noise. Budgets make news. Opinions make things unclear. But what about charts? Charts make things clear.
Even though fear may be rising on D-Street right now, the data shows that the market’s long-term structure is still strong. Most stocks are still in bullish patterns, key sectors are at demand zones, and momentum indicators are showing signs of exhaustion rather than collapse.
Disclaimer:
Note: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Brijesh Bhatia is an Independent Research Analyst and is engaged in offering research and recommendation services with SEBI RA Number – INH000022075. He has two decades of experience in India’s financial markets as a trader and technical analyst.
Disclosure: The writer and his dependents do not hold the stocks discussed here.
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