Nifty may remain under pressure next week. Key levels and what technicals suggest

It was the second consecutive week of decline for the Indian equity market, followed by a long period of outperformance. We were decoupled from global markets for the last many days, but now we are witnessing some recoupling with global markets as the dollar index is at a multiyear high of 113 and the Rupee at a record low of 81. FII has also started selling in Indian equity markets, which is why we are seeing selling pressure in large-cap stocks. The 75-basis point hike with hawkish commentary by the US Fed spooked the sentiments of global markets. Global markets are fearing a recession in the US and Europe, while inflation is still a concern.

Global cues are expected to dominate this week as well, but RBI policy and September F&O expiry will lead to volatility in our market. US GDP and unemployment numbers will be important. If we look at F&O data the short exposure of FIIs in the index future has jumped to 80% which means sentiments are weak but the market is hedged. We are heading into expiry weak on a weaker note as the Nifty slipped below the put base of 17500 where 17000 is the next base.

Technically, Nifty witnessed closing below 50-DMA with a breakdown of a bearish head and shoulder formation that may lead to further weakness. On the downside, 17150 is an immediate support level while 200-DMA of 17000 is a sacrosanct support level. On the upside, 20-DMA of 17700 is a critical hurdle.

The leader of the rally, Bank Nifty witnessed the breakdown of up-sloping channel formation with closing below 20-DMA. On the downside, 38750 will be the next important support level while 40250 will be the critical hurdle on the upside.

(Author is Head of Research at Swastika Investmart. Views expressed are completely personal and doesn't reflect view of Mint)