Investor alert! Nifty cracks below key 200-week moving average for the first time since Covid

Nifty slipped below its 200-week moving average on Tuesday, breaking a key long-term support level for the first time since the Covid crash and raising the risk of a deeper correction if the index fails to recover quickly. The index fell to an intraday low of 22,569, slipping below the 22,600 mark that technical analysts had flagged as a crucial support zone.

The level coincides with the 200-week moving average, a long-term trend indicator watched by traders and institutional investors. Rupak De, Senior Technical Analyst at LKP Securities, said Nifty had slipped to its 200-week moving average as the decline extended.

"This is the first time since the Covid crash that Nifty has fallen to the 200-week moving average, which is currently placed at 22,600," De said.


With the index now falling below that level during the session, the market will watch whether Nifty can reclaim 22,600 on a closing basis. A failure to do so could keep sentiment weak. The index closed the day at 22,716.

"A decisive break below this level could trigger a sharper correction in the market," De said. He added that if Nifty manages to hold above 22,600, a recovery towards higher levels can still be expected. On the upside, he sees immediate resistance at 22,800.

The fall comes after a sharp losing spell in Indian equities. Nifty has declined for eight straight weeks, its longest weekly losing run since 2020. The index is down 6.8% from recent levels and has already slipped to a six-month low.

Siddhartha Khemka, Head of Research, Wealth Management at Motilal Oswal Financial, said Indian equities are likely to consolidate after the recent fall.

"After the correction, valuations have moved into far more reasonable territory, and the downside from current levels should be limited," Khemka said.

But the pressure points remain strong. Elevated crude prices, a weak rupee and sustained foreign selling have kept sentiment under stress. Brent crude had risen towards $108 a barrel before easing to around $105, while the rupee is trading near two-month lows around 96.2 to the dollar.

Bond yields have also added to the pressure. India’s 10-year government bond yield has climbed to 7.17%, its highest level since April 2024. Global yields are also elevated, with the US 10-year Treasury yield around 5.2% and the UK 10-year yield near 5.4%.

The broader market has also weakened. Midcap and smallcap indices remained under pressure, showing that the selloff is not limited to frontline stocks.

Sectorally, IT remained weak as higher global yields and a subdued demand environment weighed on sentiment. On Tuesday, Nifty IT extended its losing streak to an eighth straight session. Consumer durables, chemicals, realty and cement also lagged.

The 22,600 level has now been breached intraday. If Nifty closes below this zone and fails to recover in the next few sessions, traders may brace for more downside. If the index reclaims 22,600 and holds above it, the fall could still turn into a bear-trap-like move followed by a relief bounce.

Disclosure: This article has been written by Podishetti Akash, who is not a SEBI-registered Research Analyst or an Investment Adviser. Podishetti Akash and his ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclosures here.