Technical outlook: Where can the Nifty 50 find support?

The author is an external contributor. Views are personal and do not reflect the opinion and views of PrimeInvestor.

In the previous update on the Nifty 50, we had observed that a fall below 25,100 would be a cause of concern and could push the Nifty 50 index to lower levels of 24,400-24,600 zone. And we also observed that a breach of 24,300 would be a key sign of weakness and could open up further downside targets.

The Nifty 50 index did breach the 24,300 level and as anticipated, it led to sharp fall thereafter. Let us assess the short-term outlook for the index and a few sectors. We shall also take a quick look at the near-term outlook for precious metals.

Nifty Short-Term Outlook

Have a look at the daily chart of the Nifty 50 index featured below. The price is tracing out a bearish sequence of lower highs and lower lows suggesting that the trend is undoubtedly bearish. The immediate support for the index is at 21,700-22,200 range. A breach of 21,250 could push the index to the next major support zone in the 20,500-20,700 range. 

It in context now to highlight the typical market behaviour in a downtrend. The big daily percentage gains in Nifty 50 index happens during downtrends. In a typical bull market, the rally is slow and persistent with the odd 2% gains happening in between. Whereas, in a downtrend, the rally can be really dramatic with daily gains being as high as 3-5%. 

The broader message here is – brace for volatility. Based on the news flow on the geopolitical front, there can be instances of a sharp 2-5% rally happening in between. But do not rush into the belief that the worst is over based on such dramatic rally. Monitor the market breadth and wait for signs of outperformance of Nifty 50 versus other asset class such as gold and Nifty GS Composite Index before concluding that the worst is over for the equity market. 

The recent slide has pushed the Nifty 50 index into oversold zone both in terms of price and medium-term breadth indicators. But oversold conditions alone are not good enough to expect a market bottom. There should be confirmation from relative performance and improvement in the breadth of the broader markets. 

For now, Goldbees and the Nifty GS Composite Index are still outperforming Niftybees suggesting that there is no reason to have any meaningful exposures in the equity market. We have been cautioning against having high exposures to the broader markets for quite a while now. 

There are significant hurdles for the Nifty 50 at 24,400 and 25,400. The index has to move above 24,400 before considering the possibility of the worst being over for the markets. We suspect that the index is likely to remain range bound and spend a few months below the major resistance at 25,400 before attempting any progress towards all time highs. 

The short and medium-term breadth indicators for the Nifty 50 index have turned oversold but the long-term breadth indicator is yet to get into the oversold territory. Keep an eye on the support zones mentioned above and await signs of outperformance and breadth improvement before enhancing exposures towards equity market. As always, we will come up with timely updates on the based on the evolving price action.

Sector Outlook

The interesting aspect of the recent fall is that quite a few sectors and broad market indices are displaying relative strength versus the Nifty 50 index. 

Looking at the individual sectors, the Nifty Bank index, which displayed quite a bit of promise until recently, has turned bearish and is underperforming against the Nifty 50 index in the recent weeks. Nifty IT, Nifty Realty and Nifty Digital Index are rank underperformers. Nifty CPSE, Nifty Energy, Nifty Defence, Nifty Healthcare, Nifty Pharma and Nifty Infrastructure, on the other hand, are displaying relative strength versus the Nifty 50 index.

That said, given that the Nifty 50 index is in a downtrend, the relative outperformance alone is not sufficient to justify exposures in these sectors. Wait for confirmed signs of Nifty bottoming.

Precious Metals

We had shared bullish outlook for precious metals in June 2025 and both gold and silver have moved well beyond the targets mentioned in that update. The price of gold and silver have retraced from highs recently, which appears like a consolidation or a correction from an overbought scenario.

The medium to long-term trend for both comex gold and comex silver is bullish and we expect both these metals to hit fresh all-time highs. A move above $4,750 would be an early sign of strength in Comex gold and could help the price head towards the all time high of $5,500-$5,600 range. Only a fall below $3,750 would be a cause of concern and could blunt the bullish outlook. Comex Silver has to move past $83 to suggest that the next leg of the uptrend is underway. A fall below $63 would suggest that the recent downside correction is incomplete and could delay the progress towards fresh all-time highs.

Summary

The outlook for the Nifty 50 index is bearish and the prospects of the index hitting a new all-time high appears bleak in the near term. Expect a spike in volatility and the index is likely to spend quite some time below the 25,500-25,900 zone. We will update our view periodically based on the unfolding price behaviour.