Nifty 50's Break Below Critical Support Level of 23,100 Raises Concerns of Bearish Momentum

Nifty 50 Recovers Sharply, But Overall Trend Remains Negative

The Nifty 50 recouped 254 points from the day's low and closed down by a third of a percent on June 3, while defending the 50 percent Fibonacci retracement of the April rally for another session. The index approached the crucial 61.8 percent Fibonacci retracement zone of 23,116, where it witnessed strong demand, resulting in a sharp intraday rebound.

Despite this recovery, the overall trend remains negative, with the index trading well below all key moving averages, most of which are trending downward. The momentum indicators also signalled a sideways-to-negative trend, with the RSI at 41.41, sustaining below the reference line, while the MACD remained below both the signal line and the zero line, accompanied by a further widening of the red bars in the histogram.

Key Levels to Watch

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The Nifty 50 opened lower at 23,416 and extended its losses as the day progressed. The index touched an intraday low of 23,151 before showing a gradual recovery in the second half and closing at 23,406, down 78 points (0.33 percent).

On the daily charts, the index formed a thin-bodied red candle with a prominent lower wick, indicating buying interest at lower levels amid range-bound trading.

According to experts, the 23,100–23,000 zone can act as immediate support for the Nifty 50. A decisive fall below this range could potentially drag the index towards 22,700 (the 78.6 percent Fibonacci retracement level). Immediate resistance is seen at the 23,600–23,700 levels.

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Bank Nifty Outperforms

The banking index witnessed strong follow-through buying interest and outperformed the benchmark Nifty 50, rising 471 points (0.88 percent) to close at 54,186. It also closed above the 50 percent Fibonacci retracement of the April rally for the second consecutive session. However, it failed to scale above the 20-day EMA (54,350) and remained below all key moving averages.

Bank Nifty formed a bullish candle with a noticeable lower wick on the daily timeframe, reflecting buying interest at lower levels. A strong follow-through buying move will now be crucial for the index to sustain and extend its ongoing pullback.

Volatility Index Rises

The volatility index, India VIX, rose 6 percent to 16.28 and has remained within the 14.5–17 range over the past five to six days. It needs to fall and sustain below the 15 level to bring bulls into a more comfortable position.

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