Nifty Breaks 61.8% Fibonacci Level, Exposes Deeper Correction Risk, Analyst Suggests Diversification with Select Stocks

Market Update: Nifty 50 Fails to Hold Crucial Fibonacci Retracement Level

The Nifty 50 closed below the 61.8% Fibonacci retracement level of its previous rally from 21,743 to the all-time high of 26,373, indicating a weakening technical setup. This break below a crucial retracement level often implies that the market may require additional time to establish a durable bottom.

Technical Analysis

The weekly RSI (Relative Strength Index) slipped to 30.43, its lowest reading since the COVID-19 market crash, confirming the bearish bias. The Nifty 50 has been forming weekly candles with long upper shadows over the past two weeks, signaling that each upward move is being met with selling pressure.

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Support and Resistance Zones

The 22,850–22,800 zone is expected to act as the immediate support area for the Nifty 50. A decisive break below 22,800 may trigger another leg of correction towards 22,500. On the upside, the 23,450–23,500 range is expected to act as an immediate resistance zone, where any short-term bounce could encounter fresh selling pressure.

Recommendations

Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities, recommends buying Aurobindo Pharma and Coal India for next week, as both stocks have broken their horizontal trendline on the daily chart.

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Bank Nifty

The Bank Nifty, which represents the banking sector, has also undergone a notable correction in recent trading sessions and has clearly lagged the broader benchmark indices. The index has dropped close to 7% over the past week and has broken down from its rising channel on the weekly chart, suggesting that the medium-term trend has shifted from a phase of consolidation to one of weakness.

Technical Outlook

The Bank Nifty has fallen nearly 13% in just 15 trading sessions, underscoring the sharp pace and magnitude of the decline. A fall of this nature within such a short period generally reflects aggressive position unwinding and rising risk aversion among market participants, particularly within the banking sector. Technically, the overall structure continues to remain bearish, with the 53,400–53,200 zone serving as an important support region.