The Nifty 50 index has experienced significant weakness, closing at its lowest level in 43 trading sessions. The benchmark index fell 2.45% for the week to close at 25,683, with all five trading sessions ending in red, reflecting sustained selling pressure across the market.

Technical Analysis and Trend Breakdown

The index has registered lower lows by breaking crucial swing levels during recent sessions. Key technical developments include:

This price action has broken the uptrend formation visible on both daily and weekly charts. The emergence of a bearish engulfing pattern at the top, combined with an outside bar formation, presents additional negative signals for the near term.

Moving Average Analysis

The index is currently trading below key exponential moving averages, indicating bearish momentum:

• 20-day EMA: Prices closing below this level signals near-term weakness
• 50-day EMA: Sustained trading below confirms the bearish trend
• 100-day EMA: Located near 25,618, almost tested during recent sessions
• 200-day EMA: Positioned around 25,133, potential target if selling continues

Follow-through selling below 25,600 next week could open doors for the index to test the 200-day EMA support.

Market Outlook and Strategy

The 14-period RSI on hourly charts reads close to 21, indicating oversold conditions that may provide temporary relief. However, any meaningful recovery requires a sustained move above 25,750, which represents resistance from the falling trendline.

Given the declining trend and weak market breadth, where the percentage of stocks above major EMAs continues to fall and more stocks are making 52-week lows than highs, experts suggest short-selling on every rise.

Recommended Strategy: Sell Nifty Futures on rise around 25,970 with stop-loss above 26,100, targeting 25,700.

Individual Stock Opportunities

Bandhan Bank

Current Price: ₹144.00

Bandhan Bank displays a clear bearish pattern with consistent lower highs and lower lows across all timeframes. The stock trades below all major EMAs and has formed a fresh supply zone between ₹148-152. With earnings scheduled for January 16, experts recommend buying Put options rather than direct short selling.

Strategy: Buy Bandhan Bank 150 PE (January 27 expiry) around ₹5.50 with stop-loss at ₹3.00, targeting ₹11.00 and ₹15.00.

Suzlon Energy

Current Price: ₹49.20

Suzlon has been in correction since forming a top around ₹86.00 on September 12, 2024. The stock closed at its lowest level since June 20, 2024, and exhibits a bearish flag pattern with breakdown on rising volumes.

Strategy: Sell Suzlon Futures (January 27 expiry) on rise around ₹50.60 with stop-loss at ₹52.60, targeting ₹46.00 and ₹43.50.

Market technical analyst Sudeep Shah from SBI Securities has issued a cautionary outlook for Indian equity markets, warning that the Nifty 50's current technical setup points to the possibility of further downside in the near term. The Head of Technical and Derivatives Research highlighted that broader markets are also showing signs of strain, with widespread deterioration indicating a clear contraction in risk appetite.

Nifty 50 Technical Analysis

The frontline index has experienced significant technical damage following a sharp reversal from its all-time high earlier in the week. Shah noted that Nifty 50 closed the week with a steep decline of nearly 2.50%, marking its most pronounced weekly drop since September. The analyst pointed to several concerning technical developments that reinforce the bearish outlook.

The persistent supply pressure was evident through four consecutive gap-down openings, with the bulk of the decline occurring during the final two trading sessions. Shah emphasized that the 50-day EMA, which had repeatedly cushioned declines since October, has now been breached, significantly increasing downside vulnerability.

Support and Resistance Levels

For the immediate term, Shah identifies the 25,500-25,450 region as crucial support for Nifty 50. A decisive break below 25,450 could accelerate selling pressure and potentially drag the index towards the 25,200 zone. On the upside, any rebound attempts are likely to encounter strong supply in the 25,900-25,950 band, which could limit recovery prospects.

Stock Recommendations

Despite the overall market weakness, Shah has identified two stocks with strong technical setups for accumulation:

Ipca Laboratories

The pharmaceutical stock has achieved a significant technical milestone by confirming a clear horizontal trendline resistance breakout. After facing stiff resistance in the ₹1,520-1,550 zone since early February last year, the stock has demonstrated strong follow-through movement supported by notable volume surge.

The technical indicators support the bullish outlook, with Bollinger Bands widening after a period of contraction, signaling expansion in volatility and the beginning of a fresh directional move.

IDFC First Bank

The banking stock has been consolidating in a narrow band of ₹83-87 since December 19 while maintaining its position above the 20-day EMA. The relative performance chart against Nifty shows a decisive breakout from its consolidation zone, indicating potential outperformance.

Sectoral Outlook

Regarding the Nifty Auto index, Shah has turned cautious after the sector's sharp rally. The index has formed a Dark Cloud Cover candlestick pattern on a weekly scale and slipped below its 20-day EMA level. The analyst believes the Auto index is likely to enter a period of consolidation following its recent strong performance.

For Bank Nifty, despite ending the week with a 1.50% decline, the index showed relative resilience compared to the broader market. However, the formation of a Dark Cloud Cover pattern on weekly charts suggests a shift in near-term sentiment from optimism to caution, with crucial support identified at 58,700-58,600 levels.