Nifty Declines Over 2% This Week Amid Market Volatility
The Nifty index faced significant selling pressure, closing the week down over 2%, raising concerns about future market trends.
Nifty Midcap 100 and Smallcap 100 indices dropped nearly 6% and over 7%, respectively.
FIIs were net buyers on October 23, but overall sentiment remains bearish with cumulative outflows of Rs 1,531 crore.
Key support levels for Nifty are identified at 22,350–22,300, with potential declines towards 22,000 if breached.
This week, the Nifty index experienced a notable decline of over 2%, closing below critical moving averages and forming a bearish candle on the weekly chart. The downturn was exacerbated by a significant sell-off in the broader market, particularly affecting the Nifty Midcap 100 and Smallcap 100 indices, which fell nearly 6% and over 7%, marking their steepest weekly losses since February 2025. This widespread selling has raised concerns about the potential for further declines in the coming weeks.
The Nifty's recovery efforts were thwarted at the 38.2% Fibonacci retracement level, around 23,200, leading to renewed selling pressure. As the index struggles to maintain momentum, analysts are closely monitoring key support levels, particularly the 22,350–22,300 zone. A sustained drop below 22,300 could trigger intensified selling, pushing the index towards the 22,000 mark. Conversely, resistance is anticipated in the 22,800–22,850 range, coinciding with the 20-day exponential moving average.
Foreign Institutional Investors (FIIs) displayed mixed activity, emerging as net buyers in the cash market on October 23 with purchases amounting to Rs 888 crore. However, cumulative outflows over the last five trading sessions have reached Rs 1,531 crore, indicating a lack of sustained positive sentiment. The FII long-short ratio in index futures has remained stable, suggesting that bearish positions are still prevalent among institutional investors.
The India VIX, a measure of market volatility, has surged nearly 41% since September 9, reflecting increased uncertainty in market sentiment. Following a breakout from its consolidation range, the VIX has closed higher, indicating that volatility may continue to rise. This heightened volatility is likely to keep the markets under pressure, with the 15.5–15 zone serving as a crucial support level for the VIX.
Looking ahead, the outlook for midcap and smallcap indices remains bleak, as both have shown significant underperformance. The Nifty Midcap 100 is expected to face resistance around the 56,500–56,600 range, while the Nifty Smallcap 100 may struggle against the 18,050–18,100 zone. As long as these indices remain below their respective resistance levels, the prevailing bearish trend is likely to continue, suggesting further challenges for investors in the near term.
