Stage analysis of NIFTY IT Index

The Indian stock market has been left reeling with shock as two of the country's largest IT companies, TCS and Infosys, recently announced disappointing earnings for the quarter that ended March 31, 2023. 

The news sent shockwaves through the financial world, with the Nifty IT index plummeting by 10% in just two trading sessions. This has caused widespread concern amongst investors and analysts alike and hence, we have done a detailed analysis of the Nifty IT index. 

With the sharp fall of the last two days, the Nifty IT index achieved its head and shoulder target and now, it has taken support at the head & shoulder target zone. This zone of 26184-400 has acted support four times, including Monday's low. It also faced resistance at the extended neckline of H&S for the last three weeks. 

After a 34% decline from its lifetime high (Head high), the index has been consolidating for the last 44 weeks. As long as Monday's low is protected, we can consider this consolidation a Stage-1 Base. If it declines below the level of 26184, the consolidation will extend for longer, maybe another 11-21 weeks at least. Only a move above the level of 29100 is positive and may try to transit into Stage-2. In any case, the level of 26184 does not hold; the next level of support is placed at the level of 25218, which is the 50% retracement level of the Stage-2 rally. 

If the world economy enters into a recession, then expect the index to test lower levels of 21861, which is a 61.8% retracement level. This is almost the current 44-week base breakdown target. 

It all depends on other stocks' earnings. Several large and midcap IT stocks have yet to declare their earnings. Any disappointment will add salt to the wound and as a result, the fall can extend. 

The weekly RSI has shifted its range to the bearish zone from the neutral zone. Before the price, RSI made a clear lower low. The Weekly MACD line is now below the zero line. Its Relative Strength is poor, and the Momentum is just in the 100 zone in RRG charts. Because of losing RS and Momentum, the index is in the weakening quadrant and moving towards the lagging quadrant.