Can Sensex, Nifty extend gains for a second session? Key levels to watch on May 26

Foreign institutional investors (FIIs) net bought equities worth Rs 1,796 crore on May 23, just a day after selling over Rs 5,000 crore.

Benchmark indices Nifty and Sensex are expected to open higher on May 26, building on the previous session’s momentum. Early trends from GIFT Nifty suggest a decent start, with the index trading above the 24,900 mark, up over 40 points, signalling continued investor optimism.

In the previous session, bulls staged a strong comeback with benchmark indices Nifty and Sensex rebounding sharply, led by a rally in banking, IT, and metal stocks. The upbeat sentiment spilt over to the broader markets as well, with mid and smallcap indices gaining up to nearly a percent in trade.

Foreign institutional investors (FIIs) net bought equities worth Rs 1,796 crore on May 23, just a day after selling over Rs 5,000 crore. Meanwhile, domestic institutional investors (DIIs) continued providing support to the market with a net purchase of Rs 300 crore, provisional data from the NSE showed. For the year so far, FIIs have been net sellers of shares worth Rs 1.20 lakh crore, while DIIs have net bought Rs 2.42 lakh crore worth of shares.

Here are the key levels to watch out for in today's trade. 

"The Nifty’s inability to sustain levels above 25,200 suggests that the index is undergoing a consolidation phase, with immediate support around 24,500, near its short-term moving average (20-DEMA). A breach below this level could lead to further downside toward 24,100, potentially derailing the prevailing positive trend. On the upside, a decisive breakout above 25,200 could reignite bullish momentum and pave the way toward the 25,600 level," Ajit Mishra, Senior Vice President of Religare Broking, said.

From a technical perspective, the Bank Nifty outlook is getting brighter. A potent reversal candle has emerged on the daily chart, and when paired with the inverse head & shoulders structure, it screams of bullish intent, says Dhupesh Dhameja of Samco Securities. "As long as the index holds above the 54,500 level—right where the 20-day EMA cushions the fall—the bulls are unlikely to throw in the towel. The bears, meanwhile, appear cornered. Every minor rebound was being sold into earlier, but with the bulls now taking charge, those shorting the top found themselves on the wrong foot by the close," he added.

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