Nifty 50 index double-top pattern points to more pain ahead

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Nifty 50 index double-top pattern points to more pain ahead
Credit: © Reuters

The Nifty 50 index joined its other global peers like the Nasdaq 100 , Dow Jones , and Nikkei 225 in a deep sell-off as bond yields jumped. The index crashed to a low of ₹19,421, the lowest level since 1st September. It has crashed by almost 4% from the highest level this year..

Reserve Bank of India decision

The Nifty 50 and the Sensex indices continued falling this week as risks in the market continued. One of the biggest risks in the market is the rising bond yields in the United States. The 10-year bond yield surged to over 4.7% on Tuesday, the highest level in more than a decade.

At the same time, the 30-year bond yield soared to 4.9% and is quickly approaching the 5% level. Similarly, the 5-year jumped to 4.83%. And some Federal Reserve officials believe that the bank will continue hiking rates in the coming months.

Therefore, there are risks that the global economy is staring at substantial risks in the coming months. If this happens, there is a likelihood that the equities market will be on edge for a while, which explains why other global indices have slipped.

The next key catalyst for the Nifty 50 index will be the upcoming Reserve Bank of India (RBI) interest rate decision. Most economists believe that the RBI will leave interest rates unchanged on Friday since the economy. Inflation is also coming down.

Indian banks were among the worst performers in the index. Axis Bank (NS: AXBK ) share price plunged by almost 3% while IndusInd Bank (NS: INBK ), ICICI Bank (NS: ICBK ), and SBI (NS: SBI ) fell by over 3%. Other top laggards in the index are Maruti Suzuki (NS: MRTI ), Sun Pharma (NS: SUN ), and Ultra Tech Cement.

Only a few companies were in the green. Adani Enterprises (NS: ADEL ) stock jumped by more than 3.76% while Nestle (NS: NEST ) India, Adani Ports & SEZ, Eicher Motors (NS: EICH ), and HDFC Bank (NS: HDBK ) rose by over 1%.

Nifty 50 index forecast

Nifty 50 chart by TradingView

The daily chart shows that the Nifty 50 index peaked at its record high of ₹20,217 in September. It has then pulled back in the past few days and crossed the key support at ₹19,985, the highest point on July 20th. The Nifty 50 index has retreated below the 50-day and 100-day exponential moving averages (EMA).

It has formed a double-top pattern and moved slightly above the neckline at ₹19,207. The Relative Strength Index (RSI) has moved below the neutral point. Therefore, the index will likely continue falling as sellers target the key support at ₹19,207. A break below that level will see it fall to the next support at ₹18,892 (December 1 high).

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