Nifty 50 Nearing A Bottom? CLSA's Laurence Balanco Flags Key Levels

The Nifty 50's ability to hold key support levels will be central to assessing whether Indian equities can stabilise, against a backdrop of weakening momentum across several global markets. Technical signals in the US, Japan, Taiwan, South Korea and Hong Kong point to failed breakouts and the possibility of further declines, according to CLSA's global technical research.

Laurence Balanco and Yi Zhou, who authored CLSA's October 23 Price Action note, said failed breakouts across global technology markets had shifted the tactical backdrop from trend-following to range-trading. They said the sell-off was beginning to create selective opportunities, while improving breadth in the S&P 500 was keeping its large-cap breakout intact.

The note's central theme is that markets are showing signs of exhaustion after recent moves, although the technical outlook differs across regions and indices.

What CLSA's Technical Analysis Says

CLSA said the percentage of S&P 500 constituents trading above their 20-day moving averages had risen to 71.8% on October 20, from 17.8% on September 10. The improvement in market breadth supports the index's breakout, with 7,600-7,642 identified as a key support zone.

The report said a close below 7,600 would signal a return to the previous trading range, while a break above the current range would keep the broader upward move intact.

READ | Nikhil Kamath Is 90% In Equities Despite Market Headwinds, Sees Rare Buying Opportunity In India

The Nasdaq 100, by contrast, has fallen back into its June-October trading range and below its 20-day and 50-day moving averages. The proportion of its constituents trading above their 20-day moving averages has dropped from 64% to 53%.

CLSA said the weaker breadth favoured the Magnificent Seven stocks over the wider Nasdaq 100. It added that the Nasdaq's absolute breakout remained intact, supporting its target of 80.00 for the relevant market measure cited in the report.

Earlier Nifty Levels To Watch

In an earlier assessment, Balanco identified 21,700-22,182 as a major support zone for the Nifty 50. The index faced initial resistance at 23,070, followed by a resistance zone of 23,654-24,183 around its 50-day and 200-day moving averages.

The earlier analysis also identified 26,000-26,300 as the upper boundary of the broader trading range.

These levels provide the context for assessing the Nifty's technical position, but the October 23 screenshots do not establish whether CLSA has retained or revised them in its latest assessment.

READ | Is India Next? AI Rally Pause Could Boost Stocks, Says Standard Chartered

Asian Markets Show Mixed Signals

CLSA said the breakouts in Japan and Taiwan had failed, while South Korea was moving into territory that could support a tactical rebound.

The Nikkei had fallen back below 20,000-20,665, raising the risk of a retest of support at 60,448-61,726, according to the report. Taiwan's Taiex had also fallen below its 200-day moving average and returned to its June-October range.

South Korea's Kospi 200 futures, however, had reached support at 823-870 and registered both a DeMark Combo 13 and a Setup 9 buy signal. CLSA said these signals favoured a tactical rebound towards 1,003-1,007.

Hong Kong remained vulnerable to further declines. The Hang Seng Index was approaching major support at 22,518-22,700, while the report identified further downside levels for several other Hong Kong indices.

CLSA also said the CSI300 was testing support at 4,000-4,020, with its daily relative strength index below 18, a reading it described as the lowest since June 2013. The report noted that previous instances of similarly low readings had often been followed by a recovery, although the initial rebound had typically been followed by another test of the lows.