After falling over 4%, what lies ahead for Nifty IT?

After falling over 4%, what lies ahead for Nifty IT?

by 5paisa Research Team Last Updated: 2022-06-13T15:08:53+05:30

Nifty IT has been the top underperformer in Monday’s sell-off.

The major indices have plunged about 3% amidst a global sell-off due to rising inflation. The worst affected sector due to this is IT, along with financials. Nifty IT has melted over 4% due to a severe sell-off triggered by the hot US inflation numbers. With this, Nifty IT has fallen below its support level of 28000. It is nearly down by 30% from its all-time high of 39446. It is trading just inches above its prior swing low of 27423. With such bearishness, it is below all its key moving averages and all of them point downwards. On the weekly chart, the index has plunged below its 50-week MA and indicates strong bearishness.

The technical parameters are even more bearish. The 14-period daily RSI (34.84) is in the bearish zone and below its recent swing lows. The MACD is about to signal a bearish crossover on the daily timeframe. The Relative Strength (RS) indicates a lack of good performance against the broader market, which also signifies that the sector is underperforming. Meanwhile, the weekly ADX (34.86) is pointing upwards, which means that the current downtrend is quite strong.

So the question remains, how much more shall it fall?

Well, a fall below its prior swing low of 27423 can pave the way towards the level of 25000. As per the Fibonacci extension, the index can see the levels of 24300 in times to come. Moreover, price action at these levels shall be important in understanding the trend of the index. Investors are advised to have a cautious stance on this sector. Meanwhile, the macros such as inflation, war, and economic growth shall be keenly watched as any improvement in these departments shall take the market higher, however, the chances of these are less as of now.

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