Nifty at Crucial Crossroads; Sustained Weakness May Trigger Extended Slide

Market Recap

The Nifty Index came under intense pressure, led by heavy liquidation in the IT pack, triggering a sharp gap-down opening. After the weak start, the index extended losses into the final hour before settling into a narrow consolidation band.

While the decline created near-term discomfort, it also impaired the broader structure as Nifty slipped below its crucial support zone. The index failed to sustain above its previous swing low, shifting the broader undertone toward caution. Repeated pullback attempts were consistently absorbed at higher levels, highlighting persistent supply pressure.

The earlier base formation in the 25,700–25,800 zone has now transitioned into a formidable resistance band. This region aligns with multiple technical confluences, reinforcing it as a critical supply area.

Friday’s session reaffirmed the prevailing bearish bias. After opening sharply lower, the index failed to defend key supports and witnessed aggressive selling during the final hour, underscoring sustained seller dominance. Nifty ultimately settled 336.10 points lower at 25,471.10, marking a significant bearish close. Any follow-through weakness may intensify the downside trajectory.

Technical View

Structurally, the index has entered a short-term downtrend, with sellers actively defending higher levels and converting intraday pullbacks into fresh bearish positions.

• Formation of three consecutive lower lows signals persistent distribution
• Supply pressure remains dominant on rebounds
• Structure favors a “sell on rise” approach unless 25,800 is decisively reclaimed
  
  

The 25,450–25,400 zone has evolved into a crucial make-or-break region. This band coincides with the 0.50 Fibonacci retracement, creating a strong technical confluence and marking it as a pivotal inflection point.

Momentum Indicators

• RSI remains below the neutral 50 mark, reflecting a growing bearish bias
• Downside momentum continues to strengthen with each failed pullback

A sustained move above 25,800 could trigger aggressive short covering and revive bullish momentum. Conversely, a breach below 25,450 may accelerate selling pressure and open the door to a deeper correction.

Derivatives Snapshot

Options data reflects a distinctly defensive undertone:

• Aggressive call writing at ATM and nearby strikes, capping immediate upside
• Put writers shifting to lower strikes, indicating expectations of a defined range

Key positioning:

• 25,600 Call: ~1.36 crore contracts OI build-up — strong resistance
• 25,000 Put: ~83.05 lakh contracts added — near-term support

The Put–Call Ratio (PCR) declined sharply to 0.45 from 0.61, indicating stretched pessimism and short-term oversold conditions. While this could spark intermittent short-covering bounces, the broader sentiment remains fragile with call writing dominating the landscape.

Market Outlook

The index has now closed below a significant support band, effectively converting it into resistance. Persistent rejection at higher levels, coupled with a close below short-term moving averages, underscores the strengthening bearish undertone.

With Nifty hovering around the critical 25,400–25,500 zone, the next directional trigger is clear:

• Below 25,400: Risk of accelerated selling pressure
• Above 25,800: Potential for a meaningful short-covering rally
  
  

Until buyers reclaim higher ground convincingly, intraday pullbacks are likely to be viewed as opportunities to initiate fresh bearish positions.

For now, the tactical stance remains firmly tilted toward a “sell on rise” strategy, with emphasis on disciplined risk management, selective positioning, and agility amid elevated volatility.