Nifty Bank slips below the 43,000 mark; here is what technical indicators suggest

Stock market today: The Nifty Bank index continued its slide for the second consecutive session on Wednesday (October 25), slipping below the key 43,000 level. At the time of writing the copy, the banking sector gauge traded with a cut of 0.67 per cent at 42,863.9. On Friday, amid a brutal sell-off, the Bank Nifty slipped below its 200 SMA (simple moving average). The level was breached for the first time since March this year after the banking index hit a new peak of 46,369.5 in mid-September. The index ended Monday's session 1.31 per cent lower at 43,151.2 levels.

Will the sell-off in the banking gauge deepen?

The breach of the 200-day SMA is certainly a bearish indication for the Bank Nifty. The barometer is used to determine the general market trend. So, as long as the index or the stock remains above the 200-day SMA on the daily timeframe, the index or stock is said to be in an overall uptrend. Further, as most of the traders make note of it, it acts as a crucial support, and once the level is breached, a sell-off is seen.

Prashanth Tapse, Senior VP (Research), Mehta Equities, sees aggressive downside risks for the index near 41,500 after Bank Nifty fell below the ascending trendline.

Even though investor sentiment has taken a hard hit as the index emerged as the leader in the recent bull run, the price action denotes a different picture, said Avdhut Bagkar, Derivatives & Technical Analyst of Stoxbox. The analyst added that unless the banking index stays below 43,000, the trend will remain favourable. It is only when the index closes below 43,000 for the next five sessions that it could prompt a downside trend, undermining the medium-term outlook, the expert opines.

Bears are expected to gain control, resulting in a negative sentiment when that happens. This will lead to a breakdown of the “Double Top” pattern, instilling more selling pressure. The index may then drift to 41,500 to 40,500 levels, Bagkar added.

On the flip side, the index needs to surpass 45,000 resolutely to recoup the positivity. Only then could bulls re-enter with a determined trend,” the expert said further.