NIFTY Index Chart Analysis

The Indian markets extended their losing streak in February, with Nifty 50 dropping sharply by 6 per cent. After a dismal February, the Indian markets had a relatively stable start to the month of March, but what was witnessed in the past repeated itself. Rallies are being sold and pullbacks are short-lived. As a result, Nifty 50 has extended its losing streak for the tenth straight session on Tuesday.

Ongoing concerns about US tariffs, and persistent selling by foreign institutional investors (FIIs) had weighed on the market. Every small rebound was met with aggressive selling, which has prevented any sustained recovery. Technically, what has changed from our last update is that the level of 22,800 which was considered to be a strong support had breached and as anticipated a sharp fall has materialised. 

This sharp fall led the Nifty 50 index to breach its important support of 22,000 on an intraday basis. The index is now trading at an inflection point. Why it so? Because, the Nifty 50 index has now entered a key support area between 22,000 and 21,500. The prices are currently hovering around the 100 WEMA, an important long-term moving average that previously acted as a strong reversal point in September 2020, June 2022, and March 2023. 

Here’s an interesting observation. In October 2021, the Nifty 50 index reached a new all-time high of 18,604 before entering a correction phase. During this phase, the index declined by 18 per cent from its peak, finding support around the 100-week exponential moving average (WEMA). The 14-period RSI also rebounded from the 35 zone, and the correction lasted about 35 weeks. Now, in the current scenario, the index has seen a correction of nearly 17 per cent from its all-time high level, with prices hovering around the 100 WEMA. 

With this the extent of price-wise correction is nearing the threshold of 18 per cent. The current decline has occurred within just 23 weeks, and the RSI on the weekly time scale has dropped below its October low. This signals a sharper sell-off, suggesting that investor sentiment may have become overly negative. In addition to this, 50 per cent retracement in the vicinity of 21,500 of rally from (16,828-26,227) and rising trendline drawn adjoining subsequent major lows off June 22 of 15,183 is placed at 22,000. 

Hence, the zone of 21,500-22,000 is of crucial support. Talking about the 14-period daily RSI, it oversold and hit its lowest reading since the pandemic period. With this extreme reading, one might be under the impression that is a good time to buy as the support is nearing and the market is oversold. But we need to understand every single sentiment indicator, which at the moment is screaming ‘oversold’. But, more importantly, sentiment indicators can only do that. It requires the emergence of fresh buyers to create new price action. 

So, what should be the plan of action going forward? Follow the trendline on the hourly chart if you looking for a buy. On the hourly chart, if you draw a trendline connecting the highs of February 6, 2025, this trendline has acted as a strong resistance and the bulls have not managed to sustain above this trendline and sustaining above this trendline would be the first indication that any sort of fresh buying or momentum is coming into the market. The level to watch out is 22,320 on the upside. 

This is likely to act as resistance and a breach of this level could signal that some interest on the buying side is being seen. The next resistance is seen at levels of 22,740-22,800 on the upside. Looking ahead, the 21,500-22,000 zone will be a crucial support level. For a meaningful bounce to occur, the index needs to hold near the 100 WEMA and form a reversal candle on the weekly chart. Whether a bottom forms around these levels will become clearer in the coming weeks, depending on the formation of a reversal candle. 

STOCK RECOMMENDATIONS 

ABBOTT INDIA LIMITED ........................... BUY .................... CMP ₹31,262.95 

BSE Code : 500488 
Target 1 .... ₹33,750 
Target 2 ..... ₹34,300 
Stoploss....₹29,200 (CLS) 

The company is a subsidiary of Abbott Laboratories, USA, headquartered in North Chicago and provides quality healthcare solutions in chronic and acute therapies with a mix of global and local products. It specialises in various therapeutic areas including gastroenterology, women’s health, metabolics, central nervous system, vaccines and multi-specialty. 

Technically, Abbott India has recently broken out of base in its weekly chart and currently the stock is trading about 4 per cent up from the pivot, near the all-time high level. Considering the stock is trading near its all-time high, it is trading above its key moving averages. The key moving averages are in desired sequence and trending up. 

From an O’Neil Methodology perspective, the stock has an EPS rank of 80 which is a good score indicating consistency in earnings, a RS rating of 83 which is good, indicating outperformance as compared to the other stocks, and buyer demand at A which is evident from the recent demand for the stock. The 14-period RSI is in a bullish zone and it has seen a range shift, as it failed to slip below the level of 60 in the recent pullback. The MACD is above the signal line and the momentum is increasing. Overall, the stock has great fundamentals and technical strength to stay in momentum. Consider buying this stock in the range of ₹31,100-31,750 with a stop loss of ₹29,200 for a target of ₹33,750 to ₹34,300. 

CASTROL INDIA LIMITED ......................... BUY ....................... CMP ₹221.90 

BSE Code : 500870 
Target 1 ...... ₹243 
Target 2 ..... ₹247 
Stoploss.....₹204 (CLS) 

The company is a part of the BP Group and is a leading lubricant company with a 115-year presence in India. Known for its innovation and high-performance products, Castrol India offers trusted brands like Castrol CRB, Castrol GTX, Castrol Activ, Castrol MAGNATEC, Castrol EDGE and Castrol POWER1. Serving various sectors including automotive, mining, machinery, and wind energy, Castrol India operates three blending plants and a wide distribution network, reaching over 1,50,000 retail outlets nationwide. Globally, Castrol India has been driving technological advancements for 125 years. The share price of Castrol India has witnessed a correction of nearly 28 per cent from its December swing high of ₹224.90. 

This 28 per cent correction took about 35 trading sessions. The stock price has retraced almost 100 per cent of its prior correction of 35 trading sessions in just 25 trading sessions, indicating faster pace of upward movement. In this process, the stock has managed to cross above its long-term moving average of 200 DMA, which bodes well for the stock. The 14-period daily RSI is in a rising trajectory and in the bullish zone. Moreover, recently, a range shift has been observed, validating positive bias in the stock. The daily MACD is seen sustaining above its nine-period average. Buy this stock on sustaining above the level of ₹224-226 for a target of ₹243-247 with a stop loss of ₹204. 

*LEGEND:  ◼ EMA - Exponential Moving Average.  ◼ MACD - Moving Average Convergence Divergence  ◼ RMI - Relative Momentum Index  ◼  ROC - Rate of Change  ◼ RSI - Relative Strength Index

(Closing price as of March 04, 2025) 

Disclaimer : Above recommendations are based on various technical parameters and any fundamental input has not been considered for the recommendations. Follow strict stop loss for the recommendation.