Inside Candle Divergence
25/08/2025
No Comments
As of Today at 7:21 AM IST on August 25, 2025
Indian markets faced a sharp correction on Friday following Fed Chair Jerome Powell’s Jackson Hole speech, which tempered expectations for aggressive rate cuts. GIFT Nifty is trading at 24,958.0, up +79.0 points (+0.32%), suggesting a potential recovery attempt despite Friday’s significant decline.
The Fear & Greed Index currently stands at 41.51, remaining in the “Fear” zone but showing slight improvement from the previous week’s 18.82 reading. This suggests investors should continue to “wait for market direction” rather than making aggressive moves, reflecting the heightened uncertainty following Powell’s cautious commentary on future monetary policy.
Indian markets snapped their six-day winning streak on Friday, with Nifty 50 dropping 214 points to 24,870.1 (-0.85%) and Sensex falling 693.86 points to 81,306.85 (-0.85%). The sharp selloff came after Powell hinted at a possible rate cut in September but cautioned that future moves will depend on upcoming jobs and inflation data, while warning that inflation risks still persist.
The broader market correction was led by banking and metal sectors, with Bank Nifty falling 606.05 points (-1.09%) to 55,149.4, breaking below key moving averages. Despite the weakness, global markets provided some support with US markets closing sharply higher on Friday after Powell’s speech, with the Dow rallying nearly 850 points and tech stocks leading gains.
Market psychology reflects a reality check after the recent rally, as investors reassess rate cut expectations and position themselves for a potentially more gradual monetary easing cycle than previously anticipated.
Nifty 50 Performance Analysis
Nifty 50 dropped 214 points on August 22 and about 290 points from the weekly high, forming a large bearish candle on daily charts with lighter volumes than the previous session. Despite the decline, the index still held above short and medium moving averages as well as the Bollinger midline, suggesting the overall uptrend remains intact.
Technical indicators show mixed signals with MACD keeping a positive crossover but momentum weakened, and RSI easing to 50.59 with a downward bend. Immediate support is seen around 24,850 while resistance levels are near 25,000 and 25,150. The pivot levels show Classic PP at 24,938 with resistance at R1: 25,017, R2: 25,164, R3: 25,243 and support at S1: 24,791, S2: 24,712, S3: 24,566.
Sectoral Performance Breakdown
Sectoral divergence was pronounced during Friday’s decline. Nifty Media (+0.95%) emerged as the top performer, followed by Nifty Pharma (+0.39%) and Nifty Consumer Durables (+0.10%). On the declining side, Nifty Metal (-1.25%) faced the steepest fall, followed by Nifty PSU Bank (-1.12%) and Nifty Bank (-1.09%).
The seven-day sectoral performance shows Nifty Auto leading with +5.00% gains, followed by Nifty Consumer Durables (+4.69%) and Nifty Realty (+2.66%), indicating rotational buying in defensive and domestic demand-driven sectors.
Top Gainers and Losers Analysis
Netweb Technologies emerged as the standout performer with a spectacular gain of 12.42%, followed by Vodafone Idea (+7.94%) and Aditya Birla Fashion (+7.4%). Vodafone Idea’s surge came on heavy volumes as investors positioned ahead of potential sector developments.
On the downside, Godfrey Phillips faced significant pressure with a 5.14% decline, while JK Cement dropped 4.11% and India Cements fell 3.7%. The losers were primarily from cyclical sectors, reflecting concerns about economic growth momentum.
FII/DII Flow Analysis and Implications
Institutional flow patterns show continued FII selling pressure with ₹1,622.5 crore net outflow on Friday, while DIIs turned net sellers for ₹329.2 crore, marking a shift from their usual buying stance. Over the past 30 days, FIIs have been massive net sellers to the tune of ₹51,231.9 crore, while DIIs absorbed significant selling with net purchases of ₹96,411.1 crore.
FIIs’ net short position in the futures market widened to ₹1.71 lakh crore on Friday from ₹1.68 lakh crore a day earlier, indicating increased bearish positioning among foreign investors following Powell’s speech.
Technical Analysis – Support/Resistance Levels
The market formed poor market breadth with only 7 stocks advancing versus 43 declining in the Nifty 50. Key technical levels show immediate support around 24,850 with stronger support at 24,700. On the upside, 25,000 remains a crucial resistance level, followed by 25,150.
India VIX rose 3.12% to 11.73 but stayed under all major moving averages for the fourth straight session, indicating controlled volatility despite the sharp decline.
US Markets Performance and Key Drivers
US markets closed sharply higher on Friday after Fed Chair Powell signaled a likely rate cut, with the Dow rallying +846.24 points (+1.89%) to 45,631.74, Nasdaq surging +396.22 points (+1.88%) to 21,496.54, and S&P 500 gaining +96.74 points (+1.52%) to 6,466.91. Tech stocks like Tesla, Amazon, and Nvidia led gains, though the Nasdaq still ended the week slightly lower.
Powell’s speech provided the clarity markets were seeking, with his acknowledgment that “the time has come for policy to adjust” supporting expectations for a September rate cut, despite his cautious tone about future moves depending on economic data.
Asian Markets Assessment
Asian markets advanced on Monday following US strength, with stocks in Japan and South Korea leading gains. MSCI Asia-Pacific index was up 0.2%, while Australian shares hit a fresh record. The Hang Seng gained +321.42 points (+1.27%) to 25,660.56, Nikkei 225 rose +262.15 points (+0.61%) to 42,895.44, and KOSPI advanced +23.63 points (+0.75%) to 3,192.36.
European Market Dynamics
European markets showed mixed performance with DAX up +69.75 points (+0.29%) to 24,363.09, CAC 40 gaining +31.40 points (+0.40%) to 7,969.69, and FTSE 100 rising +12.20 points (+0.13%) to 9,321.4. The modest gains reflected cautious optimism following Powell’s speech.
Key Global Economic Indicators
The US dollar steadied on Monday, climbing 0.2% against the euro to $1.1699, 0.1% versus the pound to $1.3502, and 0.4% against the yen to 147.46, after recently touching a four-week low. Gold prices slipped as the dollar firmed, with spot gold down 0.2% at $2,364.25.
Bitcoin and Major Cryptocurrency Performance
The cryptocurrency market remained under pressure following the broader risk-off sentiment, though specific current pricing data wasn’t available in the latest reports. The sector continues to face headwinds from macro uncertainty and evolving regulatory frameworks.
Institutional Crypto Adoption Updates
Corporate treasury adoption patterns continue to evolve, with several companies maintaining cryptocurrency exposure despite market volatility, providing structural support for the sector.
Regulatory Environment Impact
Global regulatory developments continue to shape long-term adoption patterns, with traditional finance integration progressing despite near-term market volatility.
USD/INR Analysis and RBI Intervention Levels
USD/INR is currently trading at 87.339, up +0.013 or +0.01% from previous levels. The rupee weakened by 27 paise to close at 87.52 against the US dollar on Friday, tracking weak equities and a stronger greenback following Powell’s speech.
The dollar’s strength across major currencies following Jackson Hole has created pressure on emerging market currencies, though the rupee has shown relative resilience compared to peers.
Major Currency Pair Movements
The US dollar steadied on Monday after Powell’s speech provided clarity on Fed policy direction. EUR/USD, GBP/USD, and USD/JPY all moved in favor of the dollar as markets recalibrated expectations for global monetary policy divergence.
Emerging Market Currency Trends
Emerging market currencies faced broad pressure from dollar strength, though improved current account balances and domestic policy support have helped limit excessive weakness in several economies.
Energy Markets – Oil and Gas Price Analysis
Crude oil prices edged up as Ukraine’s attacks on Russia raised supply concerns, with Brent at $67.78 and WTI at $63.72. Geopolitical tensions continue to provide support despite broader economic growth concerns.
Precious Metals Performance
Gold prices slipped as the dollar firmed, with spot gold down 0.2% at $3,364.25 and December futures 0.3% lower at $3,409.80. The stronger dollar following Powell’s speech reduced safe-haven demand for precious metals.
Industrial Metals and Supply Chain Updates
Industrial metals faced headwinds from concerns about global economic growth momentum and China demand outlook, with supply chain normalization continuing across major commodity segments.
Today’s Key Economic Releases
Upcoming Market-Moving Events
Corporate Actions and News Updates
Major corporate developments include InterGlobe Aviation (IndiGo) to be added to Nifty 50 index from September 30, while IndusInd Bank will be removed. Other significant updates include Brigade Enterprises launching new residential projects, CEAT’s Sri Lanka investment agreement, and multiple corporate fundraising announcements.
Nifty 50 Technical Outlook
Nifty 50 formed a large bearish candle with support holding above key moving averages. The index maintains a bullish bias above 24,850, with recovery potential toward 25,000-25,150 resistance zone. However, a break below 24,700 could signal deeper correction.
Bank Nifty Technical Analysis
Bank Nifty closed at 55,149 with a long bearish candle, slipping under the 10-, 20-, and 50-day EMAs. The index is approaching the 100-day EMA at 55,000 and testing the August low of 54,900, with momentum indicators showing weakness.
Volume Analysis and Market Breadth
Market breadth was significantly negative with heavy volume in declining stocks. The advance-decline ratio showed only 7 gainers versus 43 losers in Nifty 50, indicating broad-based selling pressure.
Options Data Analysis
Options data shows maximum Call OI at higher strikes suggesting resistance, while Put OI concentration at current levels indicates support. Weekly PCR trends suggest cautious positioning among options traders.
Short-term Trading Outlook
Current market structure suggests a wait-and-watch approach given the Fear & Greed Index at 41.51. Traders should focus on stock-specific opportunities rather than broad market positions until clearer directional signals emerge.
Long-term Investment Themes
Quality domestic consumption stories and companies with strong pricing power remain attractive for long-term investors. The recent correction may provide entry opportunities in fundamentally strong names.
Risk Management Guidelines
Given increased volatility post-Powell speech, position sizing and stop-loss discipline become crucial. Diversification across sectors and defensive positioning is advisable until macro clarity improves.
Sector Allocation Recommendations
Defensive sectors like FMCG, Pharma, and IT services may outperform in the near term, while cyclical sectors could face continued pressure until growth visibility improves.
Bottom Line Up Front: Indian markets experienced a reality check following Fed Chair Powell’s Jackson Hole speech, with the Nifty 50 dropping 214 points as investors reassessed rate cut expectations. Despite the correction, technical structure remains intact above key support levels, while GIFT Nifty’s positive opening suggests potential recovery attempts.
Key Market Drivers Today:
This Week’s Focus: Markets will track upcoming US economic data, particularly jobs and inflation numbers, which will determine the pace and magnitude of Fed rate cuts. Domestic institutional support and stock-specific news flow will drive near-term market direction.
Disclaimer: This analysis is based on publicly available market data as of August 25, 2025, market opening. All investments carry risk, and past performance does not guarantee future results. Please consult with a qualified financial advisor before making investment decisions.
Data Sources: NSE, BSE, Pre-Market Pulse, Bloomberg, Reuters, various financial data providers Report Time: As of 7:21 AM IST, August 25, 2025
© Copyright 2025. All Rights Reserved By aiTrendview.com a AQJ TRADERS Product
1) or fractional share
Investing in the stock markets carries risk: the value of investments can go up as well as down and you may receive back less than your original investment. Individual investors should make their own decisions or seek independent advice.