Nifty Struggles at Key Support, Will Consumer Durables and Metals Lead the Recovery?

The Indian equity markets corrected last week with the Nifty and Bank Nifty declining. The Nifty is now hovering around its 200-day moving average (DMA) support level, raising questions if this level will hold.

More than 75% of stocks in major indices like Nifty 500, Nifty 50 and Nifty Bank are trading below their short-term 10-day simple moving averages, indicating continued weakness. However, consumer durable, FMCG and metal stocks have shown greater resilience compared to financials.

Foreign institutional investors had built up significant long positions in stock index futures which they have now reduced, signaling they may have turned bearish. While the Nifty nearing its 200-DMA provides hope for a short recovery, broader market momentum remains weak as only 43% of Nifty 500 stocks trade above the 50-DMA.

The technology and pharma sectors have seen mixed trends. Top pharma stocks could see more declines ahead as momentum appears to be fading. Consumer durable and metal counters, which have performed better recently, may lead any recovery attempts if the markets rebound from here.

Overall, the outlook remains uncertain this week with downside risks still looming large given the weakness in the broader markets. The performances of Reliance Industries and financial stocks will be key to deciding the next trends.