- You may be sitting on a hidden downside risk as the Nifty breaches the 25,400 barrier.
- IT stocks are shedding more than 4%, hinting at a sector‑wide rotation.
- Technical charts show the index sliding under its 20‑, 50‑ and 100‑day EMAs.
- Global tariff jitters and AI‑related volatility are amplifying local weakness.
- Selective buying in metal, energy and pharma could offset broader losses.
You ignored the warning signs on Friday and paid the price today.
Related Reads: Nifty Slides Below 26,200 as Oil Stocks Fall, IT and Pharma Show Small Gains
Why the Nifty's 1% Drop Signals More Trouble Ahead
The benchmark index closed at 25,424.65, slipping 1.12% after a two‑day winning streak. More than a mere correction, the move broke three critical moving averages—20‑day, 50‑day and 100‑day EMA—an often‑cited bearish signal among technical traders. When an index breaches its EMA cluster, momentum typically shifts from buyers to sellers, setting the stage for a longer‑term downtrend.
IT Sector Under Pressure: AI Hype vs Reality
The IT index was the day’s biggest laggard, tumbling over 4% as investors reassessed the near‑term impact of artificial‑intelligence disruptions. While the global AI rally has lifted some mega‑caps, Indian software exporters face margin compression from higher R&D spend and the risk of client‑side slowdown. Companies like Infosys, TCS and HCL saw sharp declines, echoing a broader sentiment that AI‑driven earnings upside may be farther off than market narratives suggest.
Definition: Margin compression occurs when a company's cost base rises faster than its revenue, eroding profit percentages.
Technical Blueprint: Nifty's Support‑Resistance Map
According to SBI Securities’ technical team, the immediate support zone sits between 25,370 and 25,350—levels that previously bounced the index twice this month. A decisive break below could fill the gap created on expiry day and drive the index toward 25,150, the 200‑day DEMA (double exponential moving average) zone. On the upside, the 25,600–25,800 band serves as the next resistance hurdle.
Comparative Landscape: How Tata and Adani Are Reacting
While IT stocks falter, conglomerates such as Tata Consultancy Services and Adani Energy have shown resilience. Tata Consultancy, a major IT services player, managed a modest 1% gain by pivoting to cloud‑first contracts, cushioning the sector drag. Conversely, Adani Energy’s 0.8% rise stems from higher oil‑price expectations, which offset the broader market gloom. The divergent performance underscores the importance of sector‑specific catalysts over blanket market bets.
Historical Parallel: The 2022 Nifty Crash After F&O Expiry
February 2022 witnessed a similar pattern: the Nifty breached its 20‑day EMA on expiry day, leading to a 1.5% slide and a three‑week rally loss. Traders who trimmed exposure early captured a 10%‑plus gain as the index rebounded in March. The repeat of expiry‑driven volatility this February suggests that history may be repeating itself, albeit with a new AI‑related twist.
Investor Playbook: Bull and Bear Scenarios
Bear Case
- Break below 25,350 triggers a rapid test of 25,150 (200‑day DEMA).
- Further erosion of IT margins leads to a sector‑wide rotation into defensive stocks.
- Geopolitical tensions keep oil prices high, pressuring import‑heavy Indian corporates.
- Potential continuation of short‑term sell‑off could push the Nifty toward the 24,900 psychological barrier.
Bull Case
- Recovery above 25,600 attracts short‑covering and fresh buying from foreign inflows.
- Metal and pharma rally provides a cushion, allowing the index to close above the 20‑day EMA.
- Positive earnings surprises from Tata Consultancy and Adani Energy could spark a sector‑led bounce.
- Stability in global trade talks would ease tariff fears, supporting risk‑on sentiment.
Given the current volatility, a balanced approach—light position sizes, focus on high‑quality large caps, and tight stop‑losses around the 25,350 support—offers the best risk‑adjusted upside.