Sensex, Nifty tumble: How deep can the Indian stock market correction be?

Stock Market Outlook: The Sensex has shed 4.3% from its all-time high in 3 trading days and the Nifty is seen testing support at 24,250. Here's what charts suggest on likely trend ahead.

Equity benchmark indices in India have retreated sharply from all-time highs hit on August 01 amid the global market sell-off. This morning on August 05, the BSE Sensex hit a low of 78,580, and was down 1.9 per cent or 1,550 points at 79,450 levels. The NSE Nifty 50 index touched a low of 24,193, and was down 2 per cent at 24,230 levels.

Sectorally, the Nifty Auto and Nifty Metal indices tumbled over 3 per cent each. The IT index shed 2.3 per cent, and the Nifty Bank was down 1.8 per cent.

In Asia this morning, Japan's Nikkei plunged 7 per cent. The index has shed 21 per cent in less than a month, from its all-time high of 42,224 hit on July 11, 2024.

The major chunk of the fall has come in the last three trading sessions, wherein Nikkei has shed nearly 15 per cent after the Bank of Japan unexpectedly raised interest rates to 0.25 per cent.

That apart, globally fears of a recession in the US resurfaced after recent macro data showed that the economic growth was slower-than-expected, and the Fed may be late in cutting interest rates. Additionally, earnings disappointment by IT giants - Tesla and Google also weighed on the sentiment.

Dow Jones has declined 2.7 per cent in the last two trading sessions. The S&P 500 has shed 3.2 per cent in two days, and is down 5.7 per cent from its summit registered on July 16. NASDAQ has tumbled 4.7 per cent in the same period, and has cracked more than 10 per cent when compared to its peak of 18,647 hit on July 10.

"Globally, economic growth is showing signs of weakness, compounded by escalating trade tensions, conflicts in the Middle East, and persistently high inflation. The BOJ has resorted to a rate hike, impacting the Japanese market while the US Fed is contemplating a rate cut in September due to weak jobs data." said Vinod Nair, Head of Research at Geojit Financial Services in a note.

Back home, last week the Nifty 50 index snapped its 8-week winning streak, wherein the NSE benchmark had surged 10.2 per cent and hit an all-time high of 25,078 on August 01. The Nifty has shed 3.2 per cent in the last two trading sessions.  

Given this background, will the key Indian benchmark stock indices witness a steeper fall or will they be able to withstand the global sell-off? Here's what the technical charts suggest:

BSE Sensex

Current Level: 79,450

Downside Risk: 4.5%

Support: 79,940; 78,125

Resistance: 81,050; 81,755

The BSE Sensex has plunged 4.3 per cent from its all-time high of 82,129 in just three trading sessions. Going ahead, the 79,940 levels becomes the pivot point for the near-term trend. Sustained trade below the same could raise the possibility of a fall towards 75,875 levels; with interim support seen at 78,125.

On the upside, the Sensex will need to cross and sustain above 81,050 levels in order to revive the sentiment.

NSE Nifty 50

Current Level: 24,245

Downside Risk: 4.3%

Support: 24,235; 24,080; 23,840

Resistance: 24,800; 24,850

The Nifty 50 index has dipped below its short-term, the 20-DMA (Daily Moving Average) for the second time in less than two weeks. The Nifty now seems headed towards its super trend line support, which stands at 24,235, below which immediate support for the index can be expected around the lower-end of the Bollinger Bands on the daily chart at 24,080 levels.

Key momentum oscillators on the daily chart have shown negative crossover, while they are positive on the weekly time-frame. As per the weekly chart, the Nifty bulls are likely to make a strong attempt for the Nifty to hold on the 24,000-mark.

Break and sustained trade below 24,000, shall open the doors for a correction up to 23,200 levels on the Nifty; with interim support seen around 23,840 and 23,550 levels. On the upside, the Nifty is likely to face resistance around 24,800 - 24,850 levels. CLICK HERE FOR THE CHART

Nifty IT

Current Level: 39,000

Downside Risk: 6.9%

Support: 38,900

Resistance: 39,500; 40,850

The Nifty IT index today dismantled the higher-highs and higher-lows pattern on the daily chart. The index has also dipped below its 20-DMA and is seen testing support around its super trend line at 38,900 levels. CLICK HERE FOR THE CHART

Break and sustained trade below the same can trigger an extended fall towards 37,050 levels. On the upside, the 20-DMA at 39,500 levels shall act as an immediate hurdle, above which the key resistance stands at 40,850 levels.

Nifty Bank

Current Level: 50,550

Downside Risk: 6.4%

Support: 49,800

Resistance: 51,140; 51,840

The Bank Nifty index is now seen quoting below the 20- and 50-DMA, which stand at 51,840 and 51,140, respectively. The index seems to be on course to test support the 20-WMA (Weekly Moving Average) support at 49,800 levels. Break and sustained trade below the same, can trigger a slide towards 47,600 - 47,300 levels. CLICK HERE FOR THE CHART

Nifty Metal

Current Level: 8,985

Downside Risk: 7.1%

Support: 8,750

Resistance: 9,250; 9,500 

The Nifty Metal is seen trading marginally below the lower-end of the Bollinger Bands on the daily chart. The index is also quoting below its 20-, 50- and 100-DMA. Sustained trade below 9,000-mark, threatens a possibility of a steeper fall towards the 200-DMA which stands at 8,350 levels. CLICK HERE FOR THE CHART

Interim support for the index can be expected around 8,750; whereas, the key moving averages on the upside at 9,250 and 9,500 are likely to act as resistance.

Nifty Auto

Current Level: 25,010

Downside Risk: 6%

Support: 24,600

Resistance: 25,650

The Nifty Auto index is likely to test support around the lower-end of the Bollinger Bands at 24,600 levels. Failure the hold the support can lead to test of the 100-DMA at 23,500 levels. On the upside, the 20-DMA at 25,650 levels is likely to act as a resistance. The upside for the Auto index seems capped around 26,600 levels for now. CLICK HERE FOR THE CHART