Nifty slide brings 18 month old support back to the fore

With India's equity market under fresh pressure last week, after briefly recovering from a new 52-week low earlier this month, analysts are turning their attention to a level Nifty 50 hasn’t tested since April last year.

That level is 21,743.65, the intraday low touched on 7 April last year, before the US tariff war intensified and India also began being seen as an anti-artificial intelligence (AI) trade, resulting in massive foreign portfolio investor (FPI) outflows.

That low involved a 17.25% drawdown in Nifty from a high of 26,277.35 on 27 September 2024, with FPIs selling cash shares worth ₹2.85 trillion between October 2024 and March 2025.

Analysts expect the level to hold for now, but warn that a breach could trigger a deeper correction and signal a shift in the market’s medium-term trend.

"The crucial level to watch out for is 21,743.65," said Sahaj Agrawal, senior vice-president (derivatives research) at Kotak Neo. “If it is respected, we would get a bounce back to around 23,500-23,600 to begin with. If, however, the level is decisively broken that could increase chances of a further correction, and we would have to re-assess the medium-term structure of the market.”

From that low of April last year, the market took eight months to test a new high of 26,373.2 on 5 January this year on growing hopes of a resolution to India's trade deal imbroglio with the US. However, things took a turn for the worse with the outbreak of the West Asia war on 28 February.

Crude connect

The hostilities in the Gulf region drove Brent crude up 65% in a month to almost $120 a barrel by March end (as per financial portal investing.com), causing the Nifty to plunge to a 52-week low of 22,182.55 on 2 April, a 16% correction from its January high.

With India importing around 85% of its daily consumption of 5.5-5.6 million barrels, a jump in crude prices widens its trade deficit and weakens the rupee, impacting the stock market.

The market's fortunes fluctuated with crude since then. Nifty recovered from its 2 April low to hit a high of 24,774 on 3 August, when crude cooled off to $83.7 a barrel. However, a resumption of hostilities in the West Asia region since September again drove oil past $100 this month, dragging Nifty 50 to test a fresh 52-week low of 22,179.9 on 8 October.

Though the market bounced back 4% from the low to 23,146.15 on 16 October due to a short covering bout, the index pared half of the gains to close at 22,600 on Friday as crude again surged to $116.2 due to repeated Houthi attacks on Saudi Arabia.

On the edge

There are worries on the home front too. The impact of rising crude prices on the broader retail inflation forced the Reserve Bank of India to increase the benchmark repo rate, at which it lends to banks, by 25 basis points to 5.5% , this month, a first hike in almost four years . The central bank also changed the policy stance to calibrated tightening from neutral, signalling that any rate cuts were off the table for now, raising concern for leveraged mid- and small-cap companies.

With markets looking shaky, analysts are not ruling out a breach of the 52-week low, but expect the 21,743.65 support to hold unless the geopolitical situation worsens.

"The 21,743.65 support should hold for now, even if the 52-week low breaks," said Rohit Srivastava, founder of analytics firm IndiaCharts. “Markets are heavily oversold, with only 7 out of Nifty 50 stocks currently trading above their 50-week moving average, the lowest reading since the pandemic of March 2020,” said Srivastava. "Thus, a sliver of good news—such as a resolution of the West Asia war or a trade deal with the US—could result in a rebound to the 23,600-23,700 levels to begin with."

The high crude price is acting as a strong headwind for the economy and market, said V.K. Vijayakumar, chief investment strategist at Geojit Financial Services. "So long as Brent crude remains above $100, there will be pressures on the economy and the FPIs are likely to sell the dip.”

Since the beginning of this fiscal year in April, FPIs have sold cash shares worth ₹3.85 trillion, per depository data.