Nifty 50 Approaches Death Cross Amid Indian Rupee’s Decline

The “death cross” is a market chart pattern reflecting recent price weakness. It refers to the drop of a short-term moving average—meaning the average of recent closing prices for a stock, stock index, commodity, or cryptocurrency over a set period of time—below a longer-term moving average.

The Nifty 50 index dropped to its lowest point since June 7 last year, pressured by a weakening Indian rupee and lackluster earnings from major Indian companies. The benchmark index has fallen to ₹23,200, marking a 12% decline from its 2024 peak of ₹26,255.

Indian Rupee Hits Record Low

The Indian rupee has experienced a significant decline against the US dollar in recent months, reaching an all-time low of 86.50 compared to last year’s 82.65. This depreciation stems from multiple factors, including the Federal Reserve’s hawkish stance at its last meeting, where it cut interest rates by 0.25% and signaled more reductions later this year. The stronger US dollar index, now at $110, has added pressure on emerging market currencies, including the rupee.

Concerns about India’s economic slowdown have further impacted the currency. Recent data revealed that the country’s GDP grew by just 5.4% in Q3, falling short of expectations and casting doubt on India’s ability to achieve its previous 7% growth benchmark.

Additionally, the rupee’s fall aligns with broader declines in emerging market currencies such as the Chinese yuan, Turkish lira, and South African rand. While a weaker rupee benefits export-driven companies like Infosys, TCS, and L&T Tech, it adversely affects local firms reliant on imported raw materials.

Stock Market Reacts to Weak Earnings

The Nifty 50 has struggled under the weight of disappointing earnings reports. Prominent technology firms such as Tata Consultancy Services, Infosys, and Tech Mahindra have missed analysts’ expectations. Last week, HSBC analysts downgraded Indian stocks, citing rising inflation concerns.

Upcoming earnings reports from companies like Zomato, ICICI Bank, HDFC Bank, and Adani Green Energy will likely influence market sentiment further.

Nifty 50 Technical Analysis

On the daily chart, the Nifty 50 has displayed bearish signals. It has dropped sharply from its 2024 high of ₹26,255, forming a head-and-shoulders pattern. The index is also nearing a death cross, where the 50-day and 200-day Exponential Moving Averages (EMA) intersect.

Indicators such as the MACD and Relative Vigor Index (RVI) point to continued bearish momentum. Analysts predict the index could test the ₹20,000 support level, a nearly 40% drop from its peak.

In summary, a weak rupee, underwhelming earnings, and economic concerns are driving the current stock market downturn in India. Investors are closely watching upcoming corporate results and macroeconomic data for clearer signals on the market’s trajectory.