Nifty faces its longest decline first time since 1996; down for five consecutive months

The Nifty index has experienced significant losses over the last five F&O series, dropping more than 3,000 points. This marks the first time since 1996 that the Nifty has declined for five consecutive months. Despite the bearish trend, the index has managed to hold firm at the 22,500 level after two relatively quiet, rangebound sessions, even as the broader market continues to face challenges.

Market Overview: In recent trading sessions, wires and cables companies saw steep cuts, triggered by UltraTech’s $200 million investment proposal in the sector. This news caused a $4 billion sell-off in major stocks like Polycab, KEI Industries, Havells, RR Kabel, and Finolex Cables. Additionally, the market is grappling with the uncertainty surrounding tariff threats from Donald Trump and the selling pressure from foreign institutions, who are increasingly looking to deploy funds in more attractive markets like China and Hong Kong.

Nifty Performance Outlook: Despite the challenges, March has historically been a month of relief for markets. The Nifty has delivered positive returns in March for the past four years. In fact, March 2023 saw the Nifty bottom out at 16,828 before climbing to new highs. Similarly, in March 2024, the Nifty saw an annual bottom before pushing towards higher levels, only to fall post the Lok Sabha election results in June.

Looking ahead, the short-term trend for Nifty remains weak, with a rangebound movement. Nagaraj Shetti of HDFC Securities anticipates the index could slide to an immediate support level of 22,400. The immediate upside resistance stands at 22,625.

Market Resistance and Support: According to Rupak De of LKP Securities, the 22,500 level is now acting as a crucial support, similar to 22,800 in recent sessions. A break below this level could push the index towards 22,200, with 22,650 serving as immediate resistance. As long as the Nifty remains below the 22,750–22,800 range, it’s likely to remain a "sell-on-rise" market.

Shrikant Chouhan of Kotak Securities notes that 22,600 is an immediate resistance for Nifty. A move above this could push the index to 22,700–22,800 levels. On the other hand, a fall below 22,500 could result in fresh selling, bringing the index down to 22,350 levels.

Nifty Bank Overview: The Nifty Bank index was an outperformer on Thursday but saw some selling pressure towards the close. After trading with gains of over 300 points, the index corrected from levels near 49,000 and ended with modest gains. The 9-EMA for the Nifty Bank, currently at 49,100, is acting as an immediate resistance, capping any upside attempts. On the downside, support lies at 48,280, and a break of this could push the index towards 48,000. Consolidation is expected to continue for a few more sessions.

F&O Cues: In terms of futures and options (F&O) activity, fresh long positions were added in the following stocks on Thursday, indicating increased price and Open Interest:

Voltas: +2.50%, OI Change: +29.93%

Aditya Birla Capital: +3.08%, OI Change: +26.43%

SRF: +2.40%, OI Change: +22.10%

Bajaj Finserv: +2.34%, OI Change: +21.91%

AU Small Finance Bank: +6.52%, OI Change: +20.67%

Meanwhile, the following stocks saw fresh short positions, meaning a decline in price but an increase in Open Interest:

Polycab: -18.75%, OI Change: +117.00%

KEI Industries: -21.71%, OI Change: +114.00%

Chambal Fertilisers: -2.13%, OI Change: +68.53%

Delhivery: -1.59%, OI Change: +64.37%

Tata Chemicals: -3.12%, OI Change: +59.41%

The Nifty’s near-term outlook remains uncertain, with the index caught between support at 22,500 and resistance at 22,625. March could bring some relief for bulls, as it historically tends to be a positive month. However, further downside is possible if the support levels fail to hold, and the broader market's struggles may weigh on the Nifty’s performance.