How to position Nifty and Bank Nifty ahead of RBI monetary policy announcement?

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Benchmark indices are trading moderately negative at open on August 8 ahead of Reserve Bank of India (RBI) Governor Shaktikanta Das's monetary policy announcement scheduled today at 10 am (IST).

The RBI's monetary policy announcement sets the key benchmark interest rates for the Indian economy. The central bank has kept the rates unchanged at 6.5 percent for the last 18 months.

Ahead of the announcement, Nifty has been trading with volatility and ended at the 24,300 level with a gain of 1.27 percent in yesterday’s trading session. Here’s how analysts suggest positioning ahead of the RBI’s announcement:

Nandish Shah, Senior Technical and Derivative Analyst, HDFC Securities

Bank Nifty:

Bank Nifty continued to underperform compared to Nifty, gaining 0.75% against Nifty's 1.27%. Yesterday, it also closed near the day's high, unlike the previous two days. The short-term trend remains weak as it is below its 5-day EMA, placed at 50,430 levels. An upward breach of 50,430 could take Bank Nifty towards 50,900-51,100 levels. On the downside, the recent swing low of 49,659 will act as strong support. Further support for Bank Nifty is around 49,100 levels.

- Key Resistances: 50,430, 50,900
- Key Supports: 49,659, 49,100

Strategy: Buy Bank Nifty above 50,430, with a stop loss at 50,000. Target is 50,900 (cash levels).

Nifty:

Nifty 50 reversed a three-day declining streak on August 7, recording the best intraday gains in eight sessions. At close, Nifty was up 1.27% or 304.9 points at 24,297.5. Broad market indices rose more than Nifty as the advance-decline ratio surged to 3.15:1, the highest since June 6, 2024.

Nifty formed a small bullish doji formation on August 7, closing near the day's high, unlike the previous two days. An upward breach of 24,383 could take Nifty to 24,686. Support is likely around 23,960 in the near term.

- Key Resistances: 24,383, 24,686
- Key Supports: 24,074, 23,960

Strategy: Buy Nifty around 24,300, with a stop loss at 23,960. Targets are 24,383 and 24,686 (cash levels).

Sudeep Shah, DVP and Head of Technical and Derivative Research, SBI Securities:

Nifty ended at the 24,300 level with a gain of 1.27 percent and formed a small bullish candle with a minor lower shadow. Notably, the daily RSI has taken support near the 40 mark and witnessed a sharp rebound, a bullish sign according to RSI range shift rules. The last time RSI took support near the 40 level was on Budget Day, followed by a significant rally. Positionally, the 20-day EMA zone of 24,370-24,400 will act as a crucial hurdle for the index, while the 50-day EMA zone of 24,000-23,950 would act as support. The index has been experiencing selling pressure from higher levels for the past three trading sessions.

Strategy: We do not expect a V-shaped recovery. For fresh long-term buying, consider adding with a staggered approach. Only a sustainable move above 24,400 will lead to a sharp short-covering rally up to 24,650 in the short term. On the downside, below the support zone of 23,950, the index may continue experiencing selling pressure down to the 23,750-23,700 level.

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