Nifty 50 Cracks 350 Pts, ‘Finally’ Breaks 17,800! What’s Happening?
The eye-popping allegations by Hindenburg on Adani Group have created widespread panic in the Indian markets. The group has been alleged to have committed the biggest financial scam in corporate history and Hindenburg is backing it all up with its 106-page-long extensively-researched report.
The bigger problem that’s surfacing is, what would happen if it actually turns out to be a scam and the group collapses. This would create a spillover effect on the entire banking system of the country, and therefore the banking space is cracking hard.
The index is down over 2,100 points in two sessions alone (including today), as investors are fleeing from PSU banks. The share price of SBI (NS:) fell from INR 604 to INR 533 in three sessions, while PNB (NS:) is 10.7% down this week so far. In fact, the index tanked over 10% this week as investors are concerned over these banks’ exposure to the Adani Group.
Image Description: Daily chart of (spot)
Image Source: Investing.com
Now, coming to the gloomy picture, the Nifty 50 index has finally broken below the major support level of 17,800, which was keeping the market from falling till now. As indicated in my previous few analyses, this was ‘the level’ to watch out for in case the Nifty 50 is to resume its downtrend. Although, the market is still open which means the index could again close above this level, as it has done many times in the recent past, still, I believe this time is different.
The spurt in which was indicted on Wednesday has continued today. On the last day of the week, India VIX jumped around 18.6% to 17.4 so far, over and above a 7.3% rally on Wednesday. This is a concerning sign and indicates a continued downside.
The next support for the Nifty 50 is 17,450 which might be reached soon. However, going short around the CMP of 17,540 is a bit difficult as the index has been falling for the third-straight session but the trend is extremely bearish right now, therefore traders might not get an opportunity for a 200 – 300 points bounce back.
It is not a calm market environment as the panic-selling on account of the entire Adani Group fiasco is quite intense. And with VIX rising to the highest level since mid-October 2022, the moves could be sharp which calls for robust risk management and appropriate position sizing.
The trend is strongly negative, and as the index is headed to 17,450 and all counter-trend rallies from here are a selling opportunity. We would again look into this structural downtrend once the market takes a breather at this next support.