Nifty starts a downtrend - Will it sustain? - Financial Market analysis for the week ended Jul 25, 2025

Nifty broke down below a pivot low last Friday in what looks like a confirmation of a new downtrend that started with the breakdown below a 1-2-3 pattern on July 11. Friday's candle closed just above the midpoint of a range that formed during a duration of 6 weeks from 12th of May till the 24th of June. The range is ~600 points wide and has a well defined lower and upper boundary. Daily chart below.

Daily chart of Nifty illustrating a breakdown below the closest pivot low

The latest dip is Nifty's second foray into the range. The first penetration on Friday, July 18 was followed by a bullish engulfing candle and a two day rally. At that time, it looked like a false break of support at the upper boundary of the range. However, the rally eventually failed midweek with Nifty taking a sharp plunge again on Thursday and Friday to close well within the range.

What lies ahead? Technically, having breached the support at the upper boundary convincingly, Nifty looks all set to test the lower boundary of the range ~24500 which is an area of strong support.

Banknifty and IT also seem to be acting weak in tandem. Banknifty has broken below a narrow range for a second time last Friday, suggesting immediate downside. CNXIT broke the lower boundary of a crucial support last Thursday, further accelerating the fall on Friday. The broader market has also shown weakness with Midcap and Smallcap indices having generated comprehensive sell signals at the top. Daily charts of Banknifty and CNXIT below.

Daily chart of BankNifty illustrating a second breakdown below a range

Daily chart of CNXIT illustrating a breakdown below crucial support

One must also note the divergence between the Indian and global markets, most of which appears to be strong with US markets making new highs even last Friday. While not in tandem with the global markets, the Indian market seems to show signs of cracking after a good bull run since April 7th, when the tariffs were postponed by three months by Trump. Only time can tell whether this downtrend would sustain or global cues would pull up the market one more time.

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