The technicals show waning momentum, and the analyst said that a breakdown below 8,400 could trigger a sharp correction.
The Nifty India Defense Index has consolidated and is heading towards a bearish phase, after a sustained period of rally.
According to SEBI-registered analyst Rajneesh Sharma, the defense index has moved within a tight range and developed a notable bearish relative strength index (RSI) divergence after failing to break out above 9,150 over the past three weeks.
The analyst noted that while the index continued to make similar highs, the RSI registered lower highs, signaling weakening momentum.
The Nifty Defense index was already showing signs of exhaustion, as evidenced by shrinking candle sizes and heavy supply, when last viewed on June 4. Since then, its rally has faded, and it has entered a narrow sideways consolidation phase. The RSI fell sharply from above 78 to around 54.
Sharma said that the index has repeatedly failed to break above the upper channel resistance, with the 9,000+ zone acting as a psychological barrier where profit booking continues to occur. The absence of any significant volume spike further confirms the ongoing consolidation and lack of bullish conviction.
While the index remains rangebound between 8,400 and 9,150, a breakdown below the support level could lead to sharper declines, and the risk-reward setup remains poor, Sharma cautioned. Only a strong breakout above 9,150 would revive the uptrend.
The Nifty Defense Index appears to have entered a distribution phase. With momentum broken and leadership fading, it's wiser to look for cleaner setups elsewhere, he concluded.
The index has gained nearly 36% year-to-date (YTD).
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