The Nifty 50 started the week on a dismal note, decisively breaking the trendline support around 22,600 and closing more than a percent lower on February 24, despite a consistent fall in the India VIX. Considering the gap-down opening, the bears gained more strength on Monday, signaling the possibility of further correction. Hence, according to experts, any rebound is unlikely to sustain, considering the continuation of the sell-on-rally strategy. The next support is placed at 22,400 (20-month EMA), as below it, the major support is 22,000 (which coincides with the 100-week EMA). However, in case of a bounce-back, 22,700-22,800 is the immediate resistance zone.

The Nifty 50 opened lower by 186 points at 22,609 and remained in negative territory amid choppy trade throughout the session. The index hit an intraday low of 22,519 before closing the session at 22,553, down 243 points (1.06 percent). The index formed a bearish candlestick pattern with a minor upper shadow on the daily charts.

Technically, this market action signals a downside breakout of the support as well as the short-term range movement at the 22,700 level. This is not a good sign, according to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.

According to him, the underlying trend of Nifty continues to be negative. "There is a possibility of more weakness down to the next support of 22,400 (20-month EMA) in the short term. Immediate resistance is placed at the 22,750 level," he said.

The monthly options data indicated that 22,500 is likely to be the immediate support for the Nifty 50, followed by 22,300. However, the hurdle on the higher side may be at the 22,700-22,800 zone.

On the Put side, the maximum Put open interest was seen at the 22,500 strike, followed by the 22,600, 22,000, and 22,300 strikes, with the maximum Put writing at the 22,600 strike, followed by the 22,550 and 22,650 strikes. On the Call side, the 23,000 strike holds the maximum open interest, followed by the 22,800 and 23,500 strikes, with the maximum writing at the 22,600 strike, followed by the 22,800 and 22,700 strikes.

Technology, metal, banking & financial services, and oil & gas stocks were under pressure. The broader markets were also down, with the Nifty Midcap and Smallcap 100 indices falling around a percent each.

Bank Nifty

The Bank Nifty fared better than the benchmark Nifty 50, falling 329 points (0.67 percent) to 48,652. The index defended 48,300 as well as 48,500 on a closing basis and formed a small-bodied bullish candlestick pattern with a minor upper and long lower shadow, resembling a Dragonfly Doji-like candlestick pattern (not a classical one), which is generally a bullish reversal pattern.

"Now, till it holds below the 48,750 zone, some weakness could be seen towards 48,250 and then the 48,000 zones, while on the upside, a hurdle is seen at 49,000 and then 49,250 levels," said Chandan Taparia, Senior Vice President | Head – Technical Research and Derivatives at Motilal Oswal Financial Services.

Meanwhile, the volatility index, India VIX, continued its downtrend for the fifth consecutive session, falling 0.6 percent to 14.44. The VIX needs to fall and sustain below the 14 level for the bulls to get into the comfort zone.