Nifty IT: Where is the bottom?

The index remained strong and was the primary supporter for Nifty in the last few weeks.

NIFTY IT provides investors and market intermediaries with an appropriate benchmark that captures the performance of the IT segment of the market in India. The rescheduling of index constituents happens bi-annually every year. The index constitutes 10 IT stocks, with Infosys and TCS having the highest weightage of 44% and 27%, respectively.

The Nifty IT index has been hugely underperforming the other sectoral indices and has fallen nearly 10% in just five trading sessions. The main reason for such downfall can be attributed to the weak global cues that proved heavy on the index. With NASDAQ plunging nearly 20% since its all-time high, the IT-growth stocks have come under severe selling pressure, which is reflected in the index.

The index remained strong and was the primary supporter for Nifty in the last few weeks. This month, it hit an all-time high of 39500, however, the bad global cues spoiled the party, and the index has tumbled about 12% since then. On Monday, the index slipped below its 100-DMA and has turned extremely bearish. To add further, the RSI has entered the bearish zone while the MACD line has slipped below 0 level, indicating weakness. Moreover, on the weekly timeframe, the index has slipped below its 20-WMA which is not a good sign. So now the question arises, where is the bottom?

On the technical chart, the index has bounced back from the zone of 34400-34000 several times before hitting a fresh all-time high. Thus, this level remains a crucial support level for the index. Considering the severity of the fall, the 200-DMA cannot be ignored. The key indicator lies around 32500, which will act as a key support level. Thus, 34000 and 32500 will be keenly watched by the traders and price action at this level will be of utmost importance to anticipate the further trend of the index.