Indian markets are set for a potentially flat opening on Wednesday as benchmark indices Sensex and Nifty 50 brace for mixed cues from global peers.
According to trends on the Gift Nifty, there’s a likely weak start, as it was trading near 24,435, indicating a 40-point discount from Nifty futures’ last close.
This follows a strong Tuesday session where both indices closed higher, with the Nifty 50 managing to close above the 24,400 mark.
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Tuesday’s Recap
On Tuesday, the BSE Sensex advanced by 363.99 points, ending at 80,369.03, while the Nifty 50 gained 127.70 points, or 0.52%, closing at 24,466.85.
This climb comes after a triple-bottom pattern emerged between 24,073 and 24,140, providing a promising base for bullish sentiment. The Nifty’s upward momentum appears buoyed by oversold levels and bullish indicators on the daily chart, although higher timeframes hint at continued volatility.
Praveen Dwarakanath, Vice President at Hedged.in, commented on the short-term strength observed on Nifty’s daily chart.
“With momentum indicators rebounding from oversold zones, Nifty has a visible path upward to its resistance at around 24,500. A notable pattern is the ADX DI-, which is currently dropping as the ADX line rises on daily charts, suggesting momentum toward resistance at 24,500,” he said.
Nifty’s Open Interest
A quick glance at open interest (OI) data reveals traders’ cautious approach ahead of expiry. For October’s expiry, call writers have shown high activity above 24,500, while significant put writing below this level indicates a solid base at 24,500.
Increased put writing below 24,500 aligns with Tuesday’s rally, with analysts pointing to this level as a critical floor for short-term positioning.
According to Chandan Taparia, Head of Derivatives & Technicals at MOFSL, options data outlines a broader trading range between 24,100 and 24,800. Within this range, 24,500 to 24,700 serves as an immediate resistance band, potentially capping Nifty’s upside barring a decisive breakout.
Short-Term Outlook for Nifty 50
The recent dip, having pushed Nifty down by 8.5% over the past month, has sparked renewed interest in potential investment opportunities.
“With the index settling at oversold levels, a further decline of 10-15% could attract fresh investments. The recent price action around 24,400 underscores support between 24,390 and 24,310, with resistance likely in the 24,540 to 24,740 range for the next session,” advised VLA Ambala, Co-Founder of Stock Market Today.
Market participants are also keeping a watchful eye on geopolitical uncertainties, particularly in the Middle East, which could disrupt otherwise technical-driven trends.
Given the recent volatility, analysts are suggesting investors stay focused on quality stocks for resilience against possible global market shocks.
Bank Nifty Gains Momentum
Bank Nifty outperformed Nifty on Tuesday, surging 1,061.40 points, or 2.07%, to close at 52,320.70. This marked a strong breakout above 52,000, a level that had previously contained the index within a consolidation range of 51,000 to 52,000.
Bank Nifty’s performance was underscored by robust rallies in leading banking stocks, forming a bullish candle on the daily charts, which signals a continued uptrend in the index.
“The bullish close and breakout signal an optimistic outlook in Bank Nifty’s immediate future. Technical indicators such as the RSI line have crossed over the average, while the ADX DI+ line slopes upward as DI- trends down, suggesting that upside momentum is likely to persist,” said Dwarakanath.
Bank Nifty OI Data
Bank Nifty’s OI data echoes positive sentiments as traders pile into puts below the 52,000 mark, reducing pressure from short-call positions.
This shift in OI dynamics, with fewer active calls at current levels, is a strong bullish signal. “Tuesday’s rally was driven by short-covering in calls and increased put writing below 52,000, suggesting a higher probability for Bank Nifty to move toward 52,800,” said Taparia.
According to technical experts, immediate support for Bank Nifty is set at 52,000, while a successful breach above the 52,500 level could drive it further toward 52,800 and potentially 53,200, especially if momentum from banking heavyweights continues.
Broader Market Dynamics
While short-term bullish signals dominate technical charts, the overarching sentiment remains one of cautious optimism. Deepak Jasani, Head of Retail Research at HDFC Securities, noted that while immediate trends appear bullish, the broader macroeconomic concerns continue to cast a shadow.
“The short-term trend has turned bullish, with support expected around the 24,400 band. However, significant resistance between 24,567 and 24,694 suggests Nifty may still encounter hurdles before further gains can be consolidated,” he said.
The index’s recovery has reignited investor interest, especially among those waiting to capitalize on dips. However, with factors like earnings reports, geopolitical tensions, and global economic concerns in play, market participants are urged to navigate with careful portfolio balancing.
Strategy Ahead
With Tuesday’s gains, analysts recommend a balanced approach, focusing on key support and resistance levels.
For Nifty 50, maintaining support above 24,300 is critical, while resistance around 24,700 remains the short-term ceiling. Bank Nifty, having shown strong resilience, is likely to benefit from its sector momentum, but investors should remain vigilant against profit booking at higher levels.
In light of ongoing market uncertainty, a “sell on rise” approach is still prevalent, especially among traders who anticipate a moderate pullback. Ambala noted that maintaining a diversified portfolio can help mitigate risks posed by volatile swings, particularly in sensitive sectors.
As the month-end expiry approaches, traders can expect volatility to remain heightened in both Nifty and Bank Nifty. With the Indian markets navigating mixed global cues, a well-strategized approach focused on key support and resistance levels will be crucial for short-term trade setups in the upcoming session.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. SMJ is responsible for the views and analysis presented, which reflect the authors’ perspectives on the market outlook. Market investments carry inherent risks, and readers are encouraged to conduct their own research or consult a financial advisor before making any investment decisions. Neither SMJ nor the authors are liable for any potential losses incurred based on the information provided. Market conditions can change rapidly, and past performance is not indicative of future results.
