Nifty 50 near crucial support: Will the stock market bulls make a comeback?

Following their largest increase in the three months last week, Indian benchmark indices - Sensex and Nifty - succumbed to fresh selling pressure on Monday as other Asian markets declined due to uncertainty surrounding U.S. tariffs and deflationary pressures in China. Furthermore, weak US futures hinting at a negative start for Wall Street also dampened the mood.

In today's deals, the Nifty 50 rose half a percent to its day's high of 22,676.75 before falling almost 250 points from day's high to turn red in the latter half of the session.

Moreover, the indices have also been in the red for five straight months between October 2024 and February 2025 - a trend that has not been observed in decades, with the last such instance occurring in 1996.

According to Osho Krishnan, Senior Analyst - Technical & Derivative Research, Angel One Ltd, this prolonged market downturn underscores the current economic challenges and prevailing investor sentiment.

The benchmark has now retreated to levels seen a year ago, consolidating over the past five months. Osho Krishnan highlights that from a technical standpoint, the intermediate trend exhibits a concerning structure. The uncertainty in global markets, exacerbated by persistent selling pressure from foreign institutional investors (FIIs), has further dampened sentiment. With major investors offloading their holdings, market confidence remains fragile, necessitating cautious positioning by traders and investors alike.

Critical Support Levels and Future Outlook

Historical trends suggest that the market could be approaching a much-needed pause, potentially paving the way for a reversal, as has been observed in previous cycles. 

Osho Krishnan explains that statistical analysis indicates the market is experiencing significant overselling, leading to sharp corrections in valuations that had previously surged to unsustainable levels. This scenario presents an opportunity for investors to identify stocks that have now recalibrated to more reasonable valuations, the analyst said. By focusing on fundamentally sound companies that have undergone price corrections, investors can strategically position themselves for future gains.

From a technical analysis perspective, the Nifty index is currently hovering around a crucial support zone, which demands close attention from investors. Osho Krishnan points out that the index is trading near the 89-week exponential moving average (WEMA), a historically significant support level. Notably, this indicator has triggered strong price reversals in key instances, including September 2020, June 2022, and March 2023. Furthermore, last year’s pre-election rally originated from this very zone, reinforcing its importance for market participants. The critical support range is identified between 22,000 and 21,800, a level where buyers have previously entered the market with conviction.

If the Nifty holds above this crucial support, it could signal the possibility of a renewed bullish trend. However, a sustained breach of this level may indicate further downside risk. Osho Krishnan advises traders and analysts to closely monitor the market’s response to these levels, as any price action in this region could determine the market’s near-term direction.

Investment Strategy

Market volatility remains a challenge, requiring patience and a strategic approach from investors. However, Krishnan emphasises that history has repeatedly shown how short-term downturns create long-term investment opportunities. By maintaining a disciplined approach, investors can capitalise on fundamentally strong stocks that are currently trading at attractive valuations, potentially setting the stage for future gains. As markets navigate this critical juncture, informed decision-making and a keen eye on technical indicators will be key to navigating the next phase of market movements.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.