Employee monitoring securities at the BSE (Photographer: Dhiraj Sing/Bloomberg)

Technical Indicators Suggest Nifty Sell-Off May Be Over

The NSE’s Nifty 50 Index may have found a key support level and may rebound, going by the past trend and a key technical indicator.

The benchmark fell more than 5 percent from its lifetime high, the biggest decline since the post-demonetisation slide, after a global sell-off and worries over the long-term capital gains tax on equities.

The index had fallen 7 percent after Prime Minister Narendra Modi outlawed 86 percent of the currency in November 2016 in circulation, recouped some losses before again declining 4 percent.

Last year, corrections were small and short-lived. Of the four large declines, twice the index tanked 4 percent each and twice 3 percent each.

Technical Indicators Suggest Nifty Sell-Off May Be Over

The 50-stock index fell to a low of 9,687.55 points on Sept. 28 and came within kissing distance of 10,000 on Dec. 6. A trendline connecting the two points and extended upwards shows the Nifty is near a crucial support level.

Short-term trend is that the gauge will face pressure till it doesn’t surpass 10,650, Chandan Taparia, associate vice-president, Motilal Oswal Securities Ltd., said in an email. “If it manages to cross and hold above the 10,500-mark, a bounce-back towards the hurdle of 10,600-10,650 cannot be ruled out.”

On the downside, immediate support is seen at 10,400 and below that it may continue its decline towards the recent low of 10,276, Taparia said. “There’s a high probability of a consolidation then of a short-term pause in selling.”

Technical Indicators Suggest Nifty Sell-Off May Be Over

The recent global sell-off brought the Nifty down to the key 61.8-percent fibonacci retracement support level— a key technical analysis tool. It bounced back from that level on Feb. 6.

Technical Indicators Suggest Nifty Sell-Off May Be Over