Oil-Driven Sentiment May Escalate if Nifty 50 Falls Below 23,800 Next Week

Nifty 50 Shows Decent Recovery, but Momentum Indicators Weaken Confidence

The Nifty 50 showed a decent recovery after a gap-down opening and testing the 23,800 support level, closing off the day's low with a 0.7 percent loss on April 30, the final day of the month. The index managed to close slightly above the 20-day Exponential Moving Average (EMA) on a closing basis but remained below the 50-day EMA (around 24,200), which is the immediate crucial resistance. Weakening momentum indicators are denting confidence among market participants.

If the index fails to defend 23,800—an immediate crucial support—next week, further selling pressure may drag it towards 23,500–23,400. However, sustaining above this level could still increase the possibility of a move towards 24,200; only above that can levels of 24,350–24,500 be seen, according to experts. The market is expected to remain cautious next week.

Spiking oil prices well above $110 a barrel, amid escalating US-Iran tensions and continued disruption of oil supply through the Strait of Hormuz, are intensifying inflation concerns and fears of a widening deficit. Growth worries, a depreciating rupee against the US dollar, and persistent Foreign Institutional Investors (FII) outflows have also contributed to selling pressure in the market.

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The Nifty 50 opened slightly below 24,000 with losses of 180 points and corrected to 23,797 before showing a gradual recovery after the initial couple of hours of weakness. The index recouped 200 points from the day's low and closed at 23,998, down 180 points (0.74 percent) on Thursday, but gained 0.4 percent for the week, and rallied 7.46 percent for April month by snapping a four-month losing streak.

The index formed a Doji-like candlestick pattern on both the daily and weekly charts, indicating indecision among bulls and bears and range-bound trading. Broadly, the Nifty 50 traded within the previous week's range. The Relative Strength Index (RSI) fell to 50.28 and remained below the signal line, while the Moving Average Convergence Divergence (MACD) histogram's green bars continued to shrink for the ninth consecutive session on the daily charts. All this indicates a weakening momentum and a lack of directional conviction.

Key Levels to Watch

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According to Nilesh Jain, VP – Head of Technical and Derivative Research at Centrum Finverse, the immediate resistance is seen at the 50-DMA near 24,140; a decisive breakout above this could pave the way for an upside move towards 24,500. On the downside, a breach below 23,800 may drag the index towards the 23,500 level.

Weekly options data indicate that the Nifty 50 is likely to trade in the 23,500–24,500 range in the short term, while 24,000 is expected to be a crucial zone for further direction. The maximum Call open interest was seen at the 24,500 strike, followed by the 24,300 and 24,000 strikes, with the maximum Call writing at the 24,000, 24,800, and 24,100 strikes.

On the Put side, the 24,000 strike holds the maximum Put open interest, followed by the 23,500 and 23,800 strikes, with the maximum Put writing at the 23,500, 23,900, and 23,600 strikes.

The volatility index, India VIX, spiked 5.86 percent on Thursday to 18.46 after a three-day decline but managed to settle below short- and medium-term moving averages, signalling some discomfort for bulls. It declined 6.35 percent during the week. A further easing in volatility would support bullish momentum.

The market will remain shut on May 1 for Maharashtra Day.

Bank Nifty Underperforms Benchmark

The banking index continued to underperform the benchmark Nifty 50, falling 540 points (0.98 percent) to close below the 55,000 level at 54,863. The Bank Nifty fell below the 38.2 percent Fibonacci retracement level (of the April rally) intraday—around 54,500–54,600—before showing a recovery of more than 400 points.

On the daily chart, it formed a thin-body candle with a prominent lower wick, highlighting accumulation at lower levels. The index closed well below all key moving averages, with short-term averages trending down, while the RSI dropped to 45.54. The MACD is on the verge of a bearish crossover, with the histogram's green bars consistently shrinking for the seventh consecutive session. All this indicates weakening momentum and a bearish undertone.

According to Sudeep Shah, Head – Technical and Derivatives Research at SBI Securities, the immediate support for Bank Nifty is placed in the 54,400–54,300 zone. Any sustained move below this zone could result in Bank Nifty extending its weakness towards 53,900, followed by 53,500 in the short term.

On the upside, the 55,400–55,500 zone is likely to act as immediate resistance.

For the week, the Bank Nifty declined 2.2 percent and closed below the previous week's low, forming a long bearish candle with minor wicks on both sides. All this indicates a continuation of weakness with limited buying interest at higher levels. However, it surged 9.1 percent for April month, following 17 percent correction in March.