Stock Market Forecast: Reasons Sensex and Nifty Could Decline by Up to 3% in September

Short-Term Stock Market Forecast: Nifty PSU Bank, Metal, and IT indices may decline by up to 7% from current levels, while the bullish pivot for Nifty is set at 25,030.

On Wednesday, the Indian equity market experienced profit-taking due to weak signals from global peers, as investors awaited more information on the potential size of an interest rate cut in the US this September.

Overnight, the US markets recorded their largest single-day decline in a month, with the NASDAQ dropping 3.3%, the S&P 500 falling 2.1%, and the Dow Jones decreasing 1.5%. Closer to home, as of 10 AM, Japan’s Nikkei had lost 3.7%, the Hang Seng was down 1%, and China’s Shanghai Composite index fell by 0.5%.

Back home, the BSE Sensex dropped 0.9% to a low of 81,834 in early trading today. It was later seen down 0.6%, or 465 points, at 82,060.

The NSE Nifty fell to a low of 25,084 and was trading around 25,130, down 0.6%. Among sectoral indices, the Nifty PSU Bank was the biggest decliner, dropping 1.5%, followed by the Nifty IT index, which fell 1.3%. Other key indices, including the Nifty Metal, Bank Nifty, and Nifty Energy, each lost approximately 0.5%.

Current Level: 82,100
Downside Risk: 2.9%
Support: 81,340; 80,700; 80,200
Resistance: 82,635; 82,725

Currently, a key technical concern for the Sensex is that its opening and high for September are the same at 82,725, which is generally viewed as a negative sign. Until the Sensex breaks through this resistance level, the bias for September could remain weak. However, on the quarterly Fibonacci chart, the Sensex has surpassed the R-1 (Resistance) level at 82,635, indicating a potential positive bias for the quarter.

Summary:

BSE Sensex:
To achieve fresh gains, the BSE Sensex must surpass the 82,725 resistance level. If successful, it could potentially rally to 83,750 and 84,865 in the short term. However, if it fails to break through this resistance, it could face downward pressure, with support levels expected around 81,340; 80,700; 80,200; and 79,700.

Nifty:
Current Level: 25,135
Downside Risk: 2.2%
Support: 25,030; 24,875; 24,735
Resistance: 25,235; 25,280; 25,300

The Nifty has formed a ‘Hanging Man’ pattern on the monthly chart for August, which often indicates a potential reversal after a rally. This suggests that the Nifty could be susceptible to selling pressure at higher levels.

The key bullish pivot for the Nifty this month is 25,030. As long as the index remains above this level, it may avoid a potential bearish reversal. However, if the Nifty falls below and sustains trade under 25,030, it could trigger a price correction.

Over the last 14 trading sessions, the NSE Nifty rallied nearly 5%, reaching a peak of 25,334. According to the retracement theory, the Nifty could find support at its 38.2% retracement level, suggesting a potential downside target around 24,875. Should the index fall below this level, it may further decline to 24,735 and 24,595.

Nifty:
Resistance levels for the Nifty are now visible at 25,235, 25,280, and 25,300.

Bank Nifty:
Current Level: 51,345
Downside Risk: 3.2%
Support: 50,786; 50,450; 50,200
Resistance: 51,524; 51,935

The Bank Nifty has recently tried to surpass its 50-DMA (Daily Moving Average). It closed above this level for the first time in a month yesterday but is currently trading below its 50-DMA of 51,524 in today’s session.

The daily chart indicates potential resistance at 51,524 and 51,935. The index may trade with a tepid bias until it breaks through these resistance levels. On the downside, near-term support is at 50,786 (the 20-DMA) and 50,450 (the 20-WMA). If these levels are breached, the Bank Nifty could fall to 49,720, with interim support at 50,200.

Nifty PSU Bank:
Current Level: 6,871
Downside Risk: 7.2%
Support: 6,790; 6,700
Resistance: 6,945; 7,200

The Nifty PSU Bank index has been struggling around its 20-DMA for the past few weeks and is currently trapped in a congestion zone. The index faces resistance around its 100-DMA and has key support at its 200-DMA. This suggests a broad trading range of 6,700 to 7,200 for the PSU Bank index, with interim support at 6,790 and resistance at 6,945. A breakout from this range could determine the next direction for the index.

Nifty Metal:
Current Level: 9,157
Downside Risk: 5.9%
Support: 8,850
Resistance: 9,205; 9,435; 9,525

Since late August, the Nifty Metal index has consistently faced resistance around its 50-DMA, currently at 9,435. Today, the index fell below its 20-DMA for the first time since August 19, with the 20-DMA at 9,205. The index has been trading with a negative bias since the mid-July breakdown.

The chart indicates that the overall bias is likely to remain weak as long as the Metal index stays below 9,525. On the downside, the index may test support around 8,850, near the lower end of the Bollinger Bands on the daily chart. If it falls below this level, significant support is expected at 8,620, where the 200-DMA is situated.

Nifty FMCG:
Current Level: 63,380
Downside Risk: 3.8%
Support: 62,690; 61,700; 61,250
Resistance: 63,530; 64,150

Amid today’s market downturn, the Nifty FMCG index has shown resilience, recovering most of its losses. The index found support at its 20-DMA, currently at 62,690, and bounced back from an intra-day low of 62,906.

For a positive bias, the Nifty FMCG index needs to maintain levels above 63,530. Sustaining above this resistance could lead to a potential rally towards 64,570, with interim resistance at 64,150. Conversely, if the index consistently trades below 63,530, it may experience near-term weakness. In such a scenario, immediate support would be at the 20-DMA, and further declines could see the index testing levels at 61,700, 61,250, and 61,000.