Trade Setup for May 12: Nifty at precarious support levels as West Asia crisis aftermath bites

Indian equity benchmarks witnessed sharp selling pressure on Monday, with the Nifty50 plunging 360 points to close at 23,816, amid rising geopolitical concerns linked to the ongoing West Asia crisis.

Over the weekend, Prime Minister Narendra Modi stressed the need for self-reliance measures to cushion the potential economic impact arising from the conflict, which weighed on investor sentiment. The cautious undertone led the Nifty to open with a downside gap of 205 points.

Although the index attempted a recovery during mid-session trade, renewed selling in the final hour dragged the benchmark back towards the day's low. Monday's decline also marked an intensification of the weakness seen over the last few trading sessions.

Among Nifty constituents, Tata Consumer Products and Max Healthcare Institute emerged as the top gainers, while Titan Company and InterGlobe Aviation were among the biggest laggards.

On the sectoral front, the Nifty Consumer Durables and Nifty Realty indices were the worst performers, while defensive pockets such as pharma and healthcare managed to end with marginal gains.

Broader markets also saw profit booking after the recent rally, with both the Nifty Midcap 100 and Nifty Smallcap 100 indices ending lower.

Meanwhile, the India VIX surged over 10%, signalling heightened nervousness and rising volatility in the market.

What do the Nifty50 charts indicate?

The Nifty remained under pressure for the third consecutive session and slipped below its immediate support at the 50-day moving average near the 23,950 mark.

Nilesh Jain of Centrum Finverse said immediate support is now placed at 23,800, and a breach below this level could drag the index towards 23,550 in the near term.

On the upside, a move above 24,000 may trigger short covering and lead to a pullback towards 24,200.

According to Sudeep Shah of SBI Securities, the Nifty has largely traded within a broad 24,482-23,796 range over the last 12 sessions. However, Monday's close near the lower end of the range, coupled with the formation of a sizeable bearish candle, points to increasing selling pressure.

Shah also said that the index slipped below its 20-day EMA for the first time since April 27, indicating deterioration in the short-term trend.

Nagaraj Shetti of HDFC Securities said the Nifty is currently placed near the lower end of the broader 23,800-24,500 range. He believes any rebound from the 23,800 support zone could revive upside momentum in the near term.

However, a decisive breakdown below this level could drag the index towards 23,500 and even 23,200.

Rajesh Bhosale of Angel One said traders should watch key downside levels of 23,670, followed by 23,400 and 23,100 over the coming sessions. On the upside, the bearish gap near 24,100, which coincides with the 20-DEMA, is expected to act as immediate resistance.

He added that the broader uptrend would resume only if the index sustains above 24,500.

LKP Securities' Rupak De said the Nifty has given a consolidation breakdown on the daily chart, indicating the possibility of a deeper bearish phase.

The index has slipped below both the 20 EMA and 50 EMA, confirming a weakening trend.
De added that immediate support is placed at 23,700, below which the decline could accelerate further.

Resistance on the upside is seen at 24,000, above which market sentiment may improve.

Meanwhile, the Bank Nifty index also ended lower for the second straight session, reflecting sustained weakness in the banking space.

The index is currently trading below its key moving averages, which are gradually sloping downward, indicating a weakening trend.