Technical View: Nifty defends 24,700 despite losing 250 pts from day's high, more consolidation likely before hitting 25,000

Nifty outlook for September 5

The Nifty 50 staged a smart opening by reacting positively to the GST slab rationalisation announced by Finance Minister Nirmala Sitharaman and climbed closer to the 25,000 mark. However, it could not sustain those opening gains and shed nearly 250 points from the day's high to close with moderate gains on September 4.

In the process, the index defended the 24,700 level and the 100-day EMA (24,631) for the second consecutive session. Hence, if the index continues to hold these levels in the upcoming sessions, a gradual upward journey towards 25,000 is possible. This level also marks a trendline breakout point, which could lead to a further rally. However, the 24,500–24,400 zone is expected to act as a support area, according to experts.

The Nifty 50 started the day at 24,981, which was also its intraday high, but it could not sustain those gains for long. The index began witnessing profit booking as the day progressed and eventually finished with just a 19-point gain at 24,734, forming a Bearish Belt Hold pattern as well as a Bearish Meeting Line pattern—both signalling a potential bearish reversal.

According to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, the recent bounce in the Nifty appears to have encountered resistance, and the current market action suggests the possibility of further consolidation or weakness.

“The important lower supports to be watched are around the 24,550 and then 24,400 levels over the next few sessions. A decisive move only above the 25,000 mark could trigger more short covering in the market,” he said.

Weekly options data also suggests that the 24,900–25,000 range is expected to act as a resistance zone for the Nifty 50, with support seen at the 24,500 and 24,600 levels.

The 25,000 strike holds the maximum Call open interest, followed by the 24,900 and 25,500 strikes, with maximum Call writing observed at the same levels. On the Put side, the maximum Put open interest is placed at the 24,500 strike, followed by the 24,000 and 24,600 strikes, with the highest Put writing at the 24,800 strike, followed by 24,000 and 24,900.

Bank Nifty

The Bank Nifty also attempted a consolidation breakout and hit the 38.2% Fibonacci retracement level (54,400)—measured from the April low to the July high—but failed to hold due to profit booking. The banking benchmark index closed at 54,075, i.e., below the high of the previous couple of sessions, with a modest gain of 8 points. It formed a bearish candle on the daily timeframe.

The index has continued to underperform relative to the frontline indices over the past few trading sessions.

“Going forward, the zone of 54,400–54,500 will act as an immediate hurdle for the index,” said Sudeep Shah, Head – Technical Research and Derivatives at SBI Securities.

On the downside, he noted that the zone of 53,700–53,600 will act as a crucial support area.

“If the index slips below the 53,600 level, then the next crucial support is placed at 53,200,” he added.

Meanwhile, the India VIX, the fear index, continued to provide comfort for bulls as it declined by 0.71 percent to 10.85, marking a fresh six-week low and extending its downtrend for another session.

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