The Nifty 50 index has been in the spotlight this week as the implosion of Adani brings the spotlight to Indian stocks. After soaring to a high of ₹18,880 in November last year, the index pulled back to about ₹17,420 this week. It remains about 16% above the lowest point since June last year.
Nifty 50 is an India index that tracks some of the biggest companies in the country like Tata, Reliance Technologies, and Axis Bank among others. As a result, the index has come under a lot of pressure following the rapid collapse of Adani share price, as I wrote in this article. The company has shed over $90 billion in value following some fraud allegations.
As a result, many companies with an exposure to Adani have pulled back in the past few days. Banks like Axis, ICICI, IndusInd, and HDFC have seen their shares drop in the last five days. Similarly, insurance companies like HDFC Life and SBI Life have pulled back because of the crisis.
The focus will remain on the Adani crisis in the coming days. The other big catalyst will be next week’s interest rate decision by the Reserve Bank of India. Like other major central banks, the RBI will start scaling bank its hiking cycle in this meeting.
Nifty 50 index forecast
I wrote about the Nifty index two weeks ago and warned that it was primed for a pullback this year. That forecast has worked well so far as the index has pulled back by about 5% since I published it. Turning to the daily chart, we see that the Nifty 50 index rose to a high of 18,880 on December 1 of last year. That was an important level since it coincided with the October 2021 high.
Recently, the index has pulled back to about 17,485 (October 24 high). It has also plunged below the key support at 18,099, which is both a psychological level and the highest point on September 14 and April 1 last year. The shares have pulled back below the 50-day moving average while the Relative Strength Index (RSI) has dragged lower. It is stuck at the 38.2% Fibonacci Retracement level.
Therefore, the outlook of the Nifty 50 index is bearish, with the next reference level being at 17,044 (50% Fib). This price is about 3.30% below the current level. A breakdown below that support will bring the next psychological view of 16,500 to view. On the flip side, a move above the resistance at 18,100 will invalidate the bearish view.
