Why Did Nifty 50 Drop After Crossing 24,000 Levels? Explained
After the Nifty reached a height of more than 24,000, there was a dramatic fall in its prices. This fall can be attributed to geo-economic issues that arose within the market. Will it bounce back?
India’s Nifty 50, an indicator of the country’s stock market, has recently been stuck in a range pattern, unable to maintain its value over 24,000 even when Brent Crude oil, an international crude marker, drops below $100 per barrel and the USA is holding negotiations with Iran through mediators.
The index crossed the 24,000 mark twice consecutively on Monday and Tuesday, but failed to maintain itself over the important level as investors immediately got nervous and took it down again.
This figure came about in May and it is 24,482. The expansion of Nifty 50 is no longer happening.
Nifty 50 saw an increase to 24,089 by 26th May. This is based on its closing price on that particular day which was 23,914. However, the next day saw a decline in the opening price for Nifty 50 which was from 23,868.
Why is Nifty 50 not able to stay above 24,000?
The uncertainty on the possible outcome of the current negotiation process between Iran and the US is affecting Nifty 50.
However, even when all goes well in terms of peace negotiations and nothing untoward occurs concerning the outbreak of the war, the report says that the US plans to bomb Iran South while the Israelis plan to bomb southern Lebanon.
As per the reports from Al Jazeera, the Israeli forces intensified their strikes in southern Lebanon on Tuesday and killed 31 people along with wounding another 40 individuals. The strike came after an attack by the US forces on some targets in southern Iran on Monday.
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“In light of the current geopolitical uncertainty, the market is still uncertain. Oil prices remain a major source of concern. Although there are many narratives on a potential trade deal and the de-escalation, the on-ground realities are not reflecting the same optimism. Attacks have been fresh, and the tension remains high,” noted Ajit Mishra, SVP Research, Religare Broking.
“Marks need clarity on whether any improvements can be seen in relation to shipping disruption or supply chain disruption. It is only when there are indications of any normalization in those areas that marks will be able to see signs that the worst is over,” Mishra pointed out.
Even though a potential resolution between the US and Iran will be made public, the implications of such a development on world shipping and sailing vessels remain in question.
As such, concerns about the spillover effect of high oil prices into the Indian economy, rupee, and corporate profit margins are growing.
High oil prices and poor rainfall expectations in this monsoon season can cause a high level of inflation, thereby necessitating tighter monetary policy. In that context, interest rates may be raised by the US Federal Reserve, Reserve Bank of India, and many others.
When that occurs, which seems likely, then it means that the markets may post modest returns this year. That’s the reason why investors don’t take an agressive stance in investing in the index.
However, most analysts think that the index might go up to 25,000 levels with the announcement of the deal; but this is unlikely to result in a steady rise without many dips. The market would stay volatile.
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“Approach towards 25,000 on Nifty can be expected if conditions improve. I feel that 24,600 is an important level and if the index rises above that level, then it could move towards higher levels,” stated Mishra.
According to Rajesh Palviya, Head – Research, Axis Direct, the recent fall looks like a temporary fall after the sharp rise in the market, and a move beyond the 24,000 mark would push the stock towards the 24,100 mark and 24,300 mark.
On the lower side, the immediate support comes at 23,800, and 23,600 mark, where there would be buying interest, stated Palviya.
According to Shrikant Chouhan, head of equity research at Kotak Securities, 23,875 and 23,850 SMA levels are expected to serve as critical support levels for day traders.
Chouhan added that as long as trading remains above these levels, the uptrend would continue.
“As far as resistance is concerned, bulls may find it at 24,100 level. A breach of this level would drive the market up to 24,200 to 24,250 level. A breach below the 23,850 level may drive the market down to 23,700 to 23,600 levels,” added Chouhan.
Disclaimer: This story is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
