Technical View: Nifty rebounds after rout, cooling off VIX but needs to surpass 25,200 for further uptrend; Bank Nifty underperforms

Nifty outlook for February 3

• Nifty 50 may trade in 24,800–25,500 range in short term
• VIX needs to start falling below all key moving averages to add more comfort for bulls
• Momentum indicators need to align with market rally

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The Nifty 50 rebounded sharply and recorded a one-percent rally on February 2 after a day of rout led by the Union Budget, aided by short covering and a cooling off in the VIX. The recovery was on expected lines, as the Put Call Ratio (PCR) had dropped to a more than 13-month low and climbed back to 1 on Monday. The index needs to claw back and sustain above the 25,160–25,200 zone (200 DEMA and 200 DMA) for a sustainable upmove toward the 25,450–25,500 zone. Until then, consolidation with range-bound trading may be seen, with immediate crucial support at 24,800, according to experts.

Further, momentum indicators also need to align with the rally, as the trend remains mixed. The RSI climbed to 39.2 and showed a positive crossover, but the MACD continued to sustain below the reference and zero lines, though the weakness in the histogram faded slightly.

The Nifty 50 opened flat and remained range-bound but gained strength in the latter part of the session, climbing to 25,108 before closing 263 points higher (up 1.06 percent) at 25,088. The benchmark index formed a long bullish candle with a lower shadow on the daily charts, indicating range-bound trade with a positive bias. The index also surpassed above support trendlines, which is a positive sign.

“The immediate resistance is placed at the 200-DMA around 25,210, and a decisive move above this level would confirm a short-term trend reversal. On the downside, immediate support is seen at 24,800, followed by 24,680,” said Nilesh Jain, Head – Technical and Derivatives Research Analyst (Equity Research) at Centrum Broking.

Overall, the structure appears constructive for a follow-up move towards the 25,200 zone, he added.

Meanwhile, India VIX cooled off sharply by 8.15 percent to close near 13.87, signalling some comfort. However, it gradually needs to start falling below all key moving averages to add more comfort for the bulls; until then, bulls need to remain alert.

Weekly options data indicated that the Nifty 50 may trade in the range of 24,800–25,500 in the short term, as a break on either side of the range could provide a firm directional move.

The maximum Call open interest was seen at the 25,500 strike, followed by the 25,400 and 25,300 strikes, with maximum Call writing at the 25,200, 25,100, and 25,800 strikes. Meanwhile, the 24,500 strike held the maximum Put open interest, followed by the 24,800 and 25,000 strikes, with maximum Put writing at the 24,800, 24,500, and 24,900 strikes.

Bank Nifty

The Bank Nifty also rebounded but underperformed the benchmark Nifty 50. The banking index rose 202 points (0.35 percent) to 58,619 and formed a bullish candle on the daily timeframe after defending the previous day’s low (near 57,800) and the 100-day EMA on a closing basis, which is positive.

However, momentum indicators are not aligned with the market rebound. The RSI remained below the signal line, though it inclined upward to 43.34. The MACD sustained below the reference and zero lines with further weakness in the histogram. The Stochastic RSI also showed a bearish crossover.

“The 50-day EMA zone at 59,000–59,100 now acts as the immediate resistance. On the downside, 58,100–58,000 remains the crucial support zone for the index,” said Sudeep Shah, Head – Technical and Derivatives Research at SBI Securities.