Technical View: Nifty extends rally, but a decisive close above 25,450 needed for further bullish bias; Bank Nifty clears all hurdles as VIX cools off

Nifty outlook for January 29

• Weekly options data suggeststhat Nifty likely to face immediate resistance at 25,400–25,500, with support at 25,300–25,200
• Market breadth turns strongly in favour of bulls with rally in broader markets
• India VIX cools off slightly, falling 6.42 percent to 13.53

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The Nifty 50 extended its upward journey with above-average volumes for the second consecutive session, especially after climbing back above the 200-day EMA (Exponential Moving Average) in the previous session, and closed nearly seven-tenths of a percent higher on January 28. Momentum indicators also showed increasing optimism, possibly ahead of the Union Budget and following the India–EU FTA deal. In addition, the Bank Nifty gained strength by clearing all hurdles in a two-day rally.

Further, market breadth turned strongly in favour of the bulls with a rally in broader markets, while the fear index, India VIX, cooled off slightly, falling 6.42 percent to 13.53. This is supportive for the market; however, being sustained well above all key moving averages still signals caution for bulls.

Hence, the next hurdle for the Nifty 50 is placed at the 25,450–25,500 zone. A strong close above this level could open the door for 25,600–25,750, which is a crucial resistance zone. Meanwhile, the immediate key support is placed at 25,160 (200 DEMA), according to experts.

The Nifty 50 opened positive and well above the 200 DEMA (which generally acts as a strong support zone during market corrections) and traded higher throughout the session. The index witnessed some profit booking in the latter part of the session but rebounded immediately and posted a strong move again in the last hour of trade before closing at 25,343, up 167 points (0.66 percent).

The benchmark index formed a bullish candle with minor upper and lower shadows on the daily timeframe, indicating the continuation of the pre-Budget rally.

Momentum indicators also gradually turned supportive, with the RSI (40.45) showing a bullish crossover and the Stochastic RSI maintaining a positive crossover. The MACD also inclined upward slightly but remained below the reference and signal line, with weakness fading further in the histogram. All these indicators suggest improving momentum.

According to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, the overall chart pattern of the Nifty indicates the formation of a short-term bottom reversal. A sustainable move above the hurdle of 25,450–25,500 levels could open a broad-based rally for the Nifty towards 25,800 levels in the near term. Immediate support is placed at 25,200 levels.

Weekly options data suggested that the Nifty 50 is likely to face immediate resistance at the 25,400–25,500 levels, with support at 25,300–25,200.

The maximum Call open interest was placed at the 26,000 strike, followed by the 25,500 and 25,300 strikes, while the maximum Call writing was seen at the 26,000, 25,300, and 25,400 strikes. Meanwhile, the 25,000 strike held the maximum Put open interest, followed by the 25,300 and 25,200 strikes, with the maximum Put writing at the 25,300, 25,000, and 25,350 strikes.

Bank Nifty

The Bank Nifty also gained for another session, climbing above all key moving averages and rising 393 points (0.66 percent) to 59,599. The index formed a small-bodied bullish candle with a minor upper shadow and a long lower shadow on the daily charts, indicating strong buying interest at lower levels despite minor profit booking at higher levels.

The shrinking MACD histogram bars on the daily chart suggest a loss of bearish momentum and hint at potential trend stabilisation in the near term. The RSI at 52.78 turned positive, while the Stochastic RSI continued to sustain a bullish bias.

“The immediate resistance is placed in the 59,900–60,000 zone, making it a crucial supply area to watch. Any sustained move above this zone could lead the index to continue its pullback on the upside towards 60,300, followed by 60,600 in the near term,” said Sudeep Shah, Head – Technical and Derivatives Research at SBI Securities.

On the downside, the 50-day EMA zone of 59,100–59,000 is likely to act as a strong support, he added.