Nifty50 below 200-DMA, Bank Nifty breaches key 50,000 level: What next?

After a steep fall, Indian equities showed some recovery amidst the state elections in Maharasthra in Tuesday's trade, nonethless, despite a steep fall the bluechip Nifty50 index remains below the key 200 daily moving average (DMA) level of 23,574. This is as the index on November 19 closed below the aforesaid level at 23,518.5, up 0.28 per cent or 64.7.

Technically,traders use the 200-DMA level for knowing the trend of a specific index or stock. And in case, the index or stock trades below this long-term average then the instrument is in a downtrend, while those trading above 200-DMA are in an uptrend.

The index from the peak hit on September 27 of 26,277.35 has fallen by 11 per cent to the current levels. 

And during such steep fall from the peak, various factors including FII continuing sell-off, the recent strength in the dollar and yield are at play. This is despite the crude prices being at a considerable favourable level of between $70-$73.5 per barrel level. Notably, lower oil prices result in reduced costs for businesses and can improve their profit.

Nifty50 outlook

Experts at large expect the Nifty to continue its downward trend in the near term. Asit C. Mehta Investment Interrmediates Ltd. (A Pantomath Group Company) held that that in the index in the previous day's trade on a daily scale has formed a doji candle, indicating uncertainty. The high of the doji candle is approaching the 23,780 level. Thus, 23,780-23,800 will serve as critical resistance for the index. On the downside, the 50-Weekly simple moving average (WSMA) is placed near 23,300, which will provide short-term support for the index. Overall, the short-term trend is down till index remains below 23,800.

Considering the heightening geo-political rift between Ukraine and Russia may result in near-term extended sell-offs.

Bank Nifty outlook

Tejas Shah, Technical Research, JM Financial & BlinkX said the Bank Nifty was clearly an outperforming sector and it was also partially responsible for supporting Nifty in the previous day's trading session. The important key take away for Bank Nifty is that it is holding above the 200 Day Exponential moving average, which is currently placed at around 49,900 mark. On the downside, the support zone lies at 50,400-500 / 49,800-900 while the resistance is seen at 50,800-51,000 / 51,500.