Oil cools, selling intensity in Nifty takes a break or reversal?

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Nifty opened almost flat around 22,720. On Monday the market extended its fall towards the 22,500, making low of 22570, oversold territory led to a pause and minor pullback to 22700, range-bound activity cannot be ruled out at these levels.

Option data confirms the zone - peak OI sits at 22,700 on both sides and max pain at 22,750, right inside the 22,700-22,760 resistance band. A sustained move above 22,760 may trigger a reversal and open the door for a pullback towards 22,960-23000. On the downside, the 22,400-22,000 zone remains the key support.

Breadth is still weak, with 175 advances against 317 declines in the Nifty 500, but momentum is improving from oversold levels and VIX stays low near 13.3 - a setup for pause rather than fresh selling. Globally, crude and the yen remain the key variables.


The Larger Picture (update)

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The market resumed its downtrend towards the 23,000-22,500 zone after Nifty completed a 61.8% retracement of the entire fall from 24,752 during the consolidation. With Nifty falling to 22,850, our first target of 23,000 has been achieved.

The market has already absorbed the immediate Fed and BoJ rate decisions. The more important variables from here are the yen, crude oil and global liquidity.

The yen remaining weak is currently helping delay a larger carry-trade unwind. A sharp yen appreciation, particularly towards the intervention zone, could change this equation quickly.

At the same time, falling crude would remove one of the biggest sources of inflationary pressure currently affecting emerging markets.

For India, this creates a two-sided setup:

•⁠ ⁠Weak yen + cooling oil = supportive for equities
•⁠ ⁠Strong yen + elevated oil = risk of renewed selling

Key macro risks ahead:

1.⁠ ⁠Probability of US sanction-based tariffs on India of up to 500%.
2.⁠ ⁠Crude and refining capacity constraints translating into inflation in downstream products; urea shortage raising food-security concerns.
3.⁠ ⁠Escalation of the US-Iran conflict to the wider West Asia region.
4.⁠ ⁠US debt and housing stress from an unwinding of the yen carry trade.
5.⁠ ⁠AI bubble - AI may be becoming popular and genuinely successful in the right hands, but for the majority it is just new dopamine, with sky-high valuations and no signs of profits.
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