Nifty Bank Breakdown Deepens: All Eyes on Earnings for Direction

The Nifty Bank index has extended its downward journey, breaching a crucial support zone between 56,500 and 56,600, largely triggered by Axis Bank’s disappointing Q1 earnings. Adding to the bearish setup, the index has also slipped below its rising trendline — a move that reflects growing nervousness among market participants.

Critical Technical Breakdown: A Shift in Sentiment

Friday’s session marked a steep drop of 545.80 points, closing at 56,283.00, well below the lows of the previous two weeks. This move confirms a breakdown in structure and suggests that the bears are tightening their grip. The index now hovers just above the 56,000 mark, a level that's seeing heavy put writing activity, indicating that bulls may attempt to defend this crucial zone.

A glance at the daily chart shows a strong bearish gap-down candle, which pierced through multiple support levels. The breakdown from this confluence zone signals a notable shift in momentum. From a short-term perspective, the index has now slipped below both its 10-day and 20-day exponential moving averages, which sit near 56,800, highlighting continued supply pressure from higher levels.

Resistance and Support Levels to Watch

With the breach of 56,500, this zone now flips into a formidable resistance area. Unless the index closes decisively above 56,800, the prevailing downtrend is likely to continue. On the flip side, 56,000 remains the key level to watch. If this zone gives way, it could invite more aggressive selling.

The Relative Strength Index (RSI) continues to hover below 50, reinforcing the lack of upward momentum and a bearish undertone in the short term.

FII Positioning Adds to Caution

Foreign institutional investors remain skeptical. Data from index futures indicates that FIIs are maintaining a high proportion of short positions, pointing to cautiousness. However, a positive earnings surprise — particularly from ICICI Bank, expected over the weekend — could lead to short-covering, potentially offering temporary relief to the index.

Derivatives Data: Weakness Persists

Options data provides further clarity on market sentiment:

• 57,000 strike has the highest Call Open Interest at 19.85 lakh contracts, making it a strong ceiling for the index.
  
  
• Meanwhile, Put writers are hesitant to build aggressive positions except around the 56,000 strike, where 22.62 lakh contracts indicate some confidence in a near-term floor.
  
  
• The Put-Call Ratio (PCR) has dropped from 0.78 to 0.72, hinting at increasing call writing pressure and a bias toward further downside.
  
  
• Max Pain has shifted lower to 56,500, aligning with the current price action and suggesting potential expiry levels.
  
  

Market Outlook: Bulls on the Defensive

The breach of the rising trendline and multi-session base around 56,500 signals a shift in tone. As long as Nifty Bank trades below 56,800, the structure remains weak. The 56,000 level is now critical — both technically and psychologically. A breakdown below this could lead to sharper declines.

Conversely, only a firm close above 56,800 could suggest that bulls are regaining strength. Until then, expect rallies to face selling pressure, with a "sell on rise" strategy likely dominating short-term trading setups.

Conclusion:

The coming sessions will be key. With earnings from ICICI Bank on the horizon, market sentiment could swing sharply. For now, the path of least resistance remains down, and traders would do well to stay cautious until clear reversal signals emerge.