Nifty 50 Declines Sharply After Briefly Surpassing 24,000 Level

Nifty 50 Struggles to Hold Above 24,000 Amid Geopolitical Uncertainty

The Nifty 50, India's benchmark stock market index, has been unable to sustain above the 24,000 mark despite Brent Crude, the international crude benchmark, declining below $100 per barrel. The index breached the 24,000 mark in two consecutive sessions on Monday and Tuesday, but failed to hold above the key level as investors quickly turned cautious, dragging it back below the threshold.

On Tuesday, 26 May, the Nifty 50 rose to 24,089 during the session but ended at 23,914. In the morning session on Wednesday, 27 May, the index declined to 23,868. The market's struggle to hold above 24,000 can be attributed to the lack of clarity over the direction and timeline of a potential US-Iran peace deal. The ongoing uncertainty has led to increased tensions in the region, with reports of US strikes on southern Iran and Israel's strikes in southern Lebanon.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

Market experts believe that the index may rise to 25,000 if a deal is announced, but it is unlikely to be a smooth, one-way rally for the index. Volatility is likely to remain elevated. Ajit Mishra, SVP of Research at Religare Broking, observed that the market is still uncertain about the geopolitical situation, and crude oil remains a major concern for investors.

Market worries over the second and third-order impact of elevated oil prices on the Indian economy, currency, and corporate profitability are compounding. Higher oil prices, along with the anticipated poor monsoon this year, can raise inflation to significantly higher levels, leading to monetary tightening. The US Federal Reserve, the Reserve Bank of India, and several other major central banks of the world may raise interest rates and keep them up for a longer period.

Rajesh Palviya, Head of Research, Axis Direct, said the recent dip appears more like a consolidation after the strong rebound seen earlier, and any sustained move back above 24,000 could trigger fresh short covering and renewed buying momentum toward 24,100 and 24,300 levels. On the downside, immediate support is placed at 23,800, followed by 23,600, where buying interest is likely to emerge, said Palviya.

Shrikant Chouhan, the head of equity research at Kotak Securities, believes the 20-day SMA (simple moving average) at 23,875 and 23,850 would act as important support zones for day traders. Chouhan said as long as the market trades above these levels, the uptrend will remain intact.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline