Down 2.5% in February so far, will Nifty 50 remain in red for 5th month? Technical experts suggest key levels to watch

The Indian stock market saw a brief respite on Monday after eight consecutive sessions of losses. However, the rally was short-lived as frontline indices came under fresh selling pressure on Tuesday. The market remains under stress due to weak corporate earnings, economic uncertainty, sustained selling by foreign institutional investors (FIIs), high valuations ahead of the new financial year, and global macroeconomic concerns.

Just today, Sensex lost 466 points to hit the day's low of 75,531.01 while the broader Nifty declined 157 points to its intra-day low of 22,802.40.

Key Factors Driving the Market Downturn

One of the primary reasons for the continued downturn in the market is the escalating global trade tensions stemming from former US President Donald Trump’s tariff policies. His strategy, which initially targeted countries such as Mexico, Canada, and China, has now expanded to include import tariffs on steel and aluminium across all nations. The European Union’s counter-tariffs have further fueled concerns over a potential trade war, dampening investor sentiment.

Additionally, US banks transporting gold from London to New York has created further unease in global financial markets. The US Federal Reserve’s decision to maintain interest rates without any indication of future rate cuts, aggressive FII outflows, weak corporate earnings, a depreciating Indian rupee, and stretched valuations have all contributed to the prevailing market weakness.

"The market construct doesn’t favor a rally at this stage. FIIs are likely to continue selling, and news flows remain negative. The US market continues to be strong and may attract more capital away from India. Additionally, recent developments in China suggest potential policy shifts that could drive FIIs towards Chinese equities due to relatively lower valuations," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Market Performance in Recent Months

The Nifty 50 has declined 2.5 per cent so far in February, marking its fifth consecutive month of losses. The index shed 0.6 per cent in January, 2 per cent in December, 0.3 per cent in November, and 6.2 per cent in October.

In February 2025, the markets have closed in positive territory on only two of the 13 trading sessions so far, resulting in a year-to-date decline of over 3 per cent. The persistent bearish sentiment raises questions about whether the correction will continue for the remainder of the month or if a rebound is on the horizon.

Technical Outlook and Key Levels to Watch

The Nifty 50 has been on a downward trajectory for the past five months, struggling to regain momentum since hitting its all-time high of 26,277.35 in September 2024. However, technical indicators such as the double-bottom pattern and positive RSI divergence suggest the potential for a short-term pullback. 

Om Mehra, Technical Analyst at SAMCO Securities pointed out that with Nifty's January monthly close at 23,508.40, it needs to gain nearly 550 points in the remaining eight trading sessions to avoid a fifth straight negative monthly close.

Despite continuing its lower-high, lower-low formation and trading below key moving averages, the recent double-bottom pattern and positive divergence in the daily RSI suggest the possibility of a strong pullback, Mehra said. 

“Moreover, Nifty has consistently held above the 22,800 mark, indicating resilience and consolidation within this range. A relief rally is anticipated, with a close above 23,240, potentially, opening the door for a move toward 23,400,” he added.

Mehta sees resistance at 23,500, adding that a breakout above this level could extend the rally toward 23,570. On the downside, key support levels are at 22,700 and 22,650, he said. However, traders are advised to adopt a cautious approach as intermittent pullbacks are expected, and a one-sided rally appears unlikely in the near term.

Trivesh D, COO at Tradejini also stated that the Nifty 50 is currently positioned at a crucial support level of 22,700. 

“The market remains in a wait-and-watch phase, with a potential recovery only feasible if there is a notable improvement in market liquidity. If the 22,700 support level holds, the market could witness a relief rally. However, a breach below this level could trigger further declines. On the upside, key resistance is observed near the 23,300 mark, which will be a significant level to watch for any potential bullish momentum,” Trivesh D added.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.