The Nifty 50 index remained on edge this week as investors reacted to the ongoing weakness of the Indian economy. It retreated to ₹24,130, down by 8.20% from its highest level this year as most companies dropped.
India’s GDP is contracting
The Nifty 50 index has remained on edge in the past few months as concerns about the Indian economy contracted. Data by the Indian Statistics Agency showed that the economy slumped by 5.4% in the third quarter, lower than the median estimate of 7.0%.
These numbers pushed analysts from key banks like Goldman Sachs, Barclays, IndusInd Bank, Standard Chartered, ICICI, Emkay Global, and Elara Capital lowered their estimate for the economy.
These numbers showed that the Indian economy was struggling because of falling wages, declining company profits, and high inflation numbers.
Recent data showed that the Indian Consumer Price Index (CPI) has continued rising in the last few days. The CPI rose from 5.49% in October to 6.2%, higher than the median estimate of 5.8%.
India’s inflation has been in a strong uptrend after bottoming at 3.60% in July last year. It has now moved to the highest point since August last year.
Therefore, analysts anticipate that the Reserve Bank of India (RBI) will start cutting interest rates soon. In a recent statement, analysts at Bloomberg noted that the bank would do that as soon as this week. If this happens, it may cut rates from 6.50% to 6.25%. A Bloomberg analysts said:
“The bigger-than-expected slump in India’s growth in the July-to-September quarter raises the possibility of a rate cut at the central bank’s Dec. 6 meeting. That’s not our base case, however. We still expect the Reserve Bank to hold, given Governor Shaktikanta Das’ hawkish comments.”
Top NIFTY 50 index movers
Most companies in the NIFTY 50 index have done well this year. The best-performing company in the NIFTY 50 this year is Trent, one of the biggest retail companies in India. It owns companies like Westside, Zudio, UTSA, and Samoh.
Trent, which is mostly owned by Tata Group, has jumped by 122% this year as its growth accelerated earlier this year. Recently, however, the company posted weak financial results even as its revenue rose by 39% in the second quarter. While this double-digit growth is a good one, it was also the slowest growth since March 2021.
Mahindra & Mahindra share price has jumped by almost 72% this year as the automaker did well. Three weeks ago, the company said that its second-quarter revenue as its profit after tax rose by 13.2% to ₹38.41 billion or $455 million.
The other notable gainer in the Nifty 50 index was Bharat Electronics, whose stock jumped by 67%. Its recent revenue and profit growth metrics jumped by over 39% in the last quarter.
Other top gainers in the index are companies like Bharti Airtel, ICICI Bank, Power Grid, Shriram Finance, and Sun Pharma.
On the other hand, the top laggards in the index were companies like IndusInd Bank, Titan Company, Nestle India, Asian Paints, and Adani Enterprises have crashed. The Adani stock price crashed after Gautam Adani was sued by the American government.
Nifty 50 index analysis
Nifty 50 chart by TradingView
The daily chart shows that the Nifty 50 index has dropped in the past few weeks. It has dropped from a high of ₹26,267 earlier this year to ₹24,000. It has retreated by almost 10% from its highest level this year.
The index has moved below the 50-day and 100-day Exponential Moving Averages (EMA). Also, the Relative Strength Index (RSI) and the MACD indicators have pointed upwards in the past few days.
The Nifty 50 index has formed a rising broadening wedge pattern, a popular bearish sign. Therefore, there are odds that the index will drop to the next key point to watch being at ₹21,300, its lowest point on June 4. If this happens, the index will drop by about 11.40%.
The alternative scenario for the Nifty index is where the index rises to the key resistance point at ₹26,267.
The post Nifty 50 index risky pattern points to a strong reversal appeared first on Invezz
