Trading Plan: Will Bank Nifty continue to outpace benchmark Nifty 50?

Nifty Trading Plan

The Nifty 50 remained rangebound for almost a week, closing marginally lower after showing a nice recovery from the day’s low on March 12. On the higher side, the hurdle is placed at 22,700, as closing decisively above it can open doors for 23,000. However, on the lower side, 22,250 is the support zone, as falling firmly below it can drive the index down toward 22,000-21,950, the crucial support area, according to experts. The Bank Nifty snapped three-day losses with above-average volumes but needs a strong close above 48,800 (the key resistance) for a strong upward journey. Until then, consolidation may continue with support at 47,700.

On Wednesday, March 12, the Nifty 50 fell 27 points to 22,471, while the Bank Nifty finished at 48,057, up 203 points. The market breadth was consistently dominated by bears, as a total of 1,736 shares saw downward moves compared to 885 rising shares on the NSE.

Nifty Outlook and Strategy

Sudeep Shah, Deputy Vice President and Head of Technical and Derivative Research at SBI Securities

In line with our expectations, the benchmark index Nifty 50 has witnessed a pullback rally of over 700 points in just 5 trading sessions. However, on Monday, it faced resistance in the zone of 22,670-22,700, which was the confluence of the 20-day EMA and the 38.2 percent Fibonacci retracement level of its prior downward journey (23,807-21,964). Since then, the index has been moving within a narrow 362-point range, indicating a phase of consolidation.

Considering the current chart structure, we believe the index is likely to consolidate in the zone of 22,700-22,200 for the next couple of trading sessions. Any decisive move on either side will lead to a trending move in the index. The momentum indicators are also suggesting sideways action for the market. The daily RSI (Relative Strength Index) has been oscillating in the zone of 42-39 for the last 5 trading sessions. Further, the trend strength indicator, ADX (Average Directional Index), has been falling for the last six trading sessions, suggesting a lack of strong directional momentum in the market.

If the index sustains above the 22,700 level, then we may witness an extension of the pullback rally up to the level of 23,000, followed by 23,200 in the short term. On the downside, the zone of 22,230-22,200 will act as crucial support for the index. If the index slips below 22,200, then the next support is placed in the zone of 21,950-21,900.

Key Resistance: 22,700, 23,000, 23,200

Key Support: 22,200, 21,950, 21,900

Strategy: Buy Nifty Futures at 22,500-22,530, with a stop-loss of 22,420, targeting 22,730-22,780.

Jatin Gedia, Technical Research Analyst, Capital Market Strategy at Mirae Asset Sharekhan

On the daily charts, we can observe that the Nifty has again tested the support zone of 22,300 and defended it successfully. Despite the pressure from the Nifty IT index, the selling pressure was absorbed, and the Nifty closed only marginally in the negative. The daily and hourly momentum indicators have a positive crossover, which is a buy signal. Thus, we shall continue to maintain our positive stance on the index with a short-term target of 22,800-23,000. The crucial support zone is 22,300-22,250.

Key Resistance: 22,800, 23,000

Key Support: 22,300, 22,250

Strategy: Buy Nifty Futures with a stop-loss of 22,380, targeting 22,630-22,680.

Vidnyan S Sawant, Head of Research at GEPL Capital

The Nifty index recently witnessed a bullish mean reversion from its 100-week EMA (Exponential Moving Average), which aligns with the 78.6% Fibonacci retracement level of the prior upmove from 21,281 to 26,277. On the daily scale, the index is struggling to sustain above the 22,500 level and is likely to consolidate within the 22,300-22,800 range. A breakout on either side will determine the next decisive move.

Key Resistance: 22,500, 22,800

Key Support: 22,300, 22,100

Strategy: Sell Nifty Futures below 22,400 for a target of 22,300 and 22,100 with a stop-loss of 22,470.

Bank Nifty - Outlook and Positioning

Sudeep Shah, Deputy Vice President and Head of Technical and Derivative Research at SBI Securities

The Bank Nifty, a crucial gauge for India’s banking sector, has been underperforming the frontline indices for the past five trading sessions. However, despite this relative weakness, the index has managed to hold the critical support zone of 47,800-47,700, where multiple swing lows are positioned. This places the index at a make-or-break juncture, with its next directional move likely to set the tone for the broader banking sector.

Among its key constituents, ICICI Bank, HDFC Bank, and Kotak Mahindra Bank have been demonstrating strong relative outperformance, providing some stability to the index. On the flip side, IndusInd Bank and Axis Bank continue to lag, adding pressure to the overall structure. Notably, IndusInd Bank has been the major drag on Bank Nifty’s performance this week, plunging nearly 27% in just three trading sessions, significantly contributing to the index’s weakness.

Talking about crucial levels for the index, the zone of 47,800-47,700 will act as crucial support for the index. If the index slips below 47,700, it is likely to resume its downward journey and test the level of 47,000, followed by 46,500 in the short term. On the upside, the zone of 48,400-48,500 will act as a crucial hurdle for the index.

Key Resistance: 48,400, 48,500, 48,800

Key Support: 47,700, 47,000, 46,500

Strategy: Buy Bank Nifty Futures at 48,200-48,230, with a stop-loss of 47,900, targeting 48,650-48,800.

Jatin Gedia, Technical Research Analyst, Capital Market Strategy at Mirae Asset Sharekhan

Bank Nifty has successfully defended the crucial support zone of 47,800-47,700. The positive upmove in Bank Nifty offset the downmove in the Nifty IT index to some extent. Going ahead, we expect the Bank Nifty to consolidate between 48,800-47,700 and form a base for the next leg of the upmove. A decisive close below the 47,700 mark can lead to a fall toward the 46,100 level, which coincides with the Lok Sabha election result day panic low. Positive divergence on the daily momentum indicator suggests exhaustion of selling pressure. Overall, the probabilities of rangebound price action are high for Bank Nifty.

Key Resistance: 48,700, 48,800

Key Support: 47,800, 47,700

Strategy: Buy Bank Nifty Futures with a stop-loss of 47,800 for a target of 48,800.

Vidnyan S Sawant, Head of Research at GEPL Capital

On the weekly timeframe, Bank Nifty has been consolidating within a defined range for the past three weeks. On the daily scale, its inability to sustain above the key short-term averages of the 12 and 26 DEMA indicates a persistent weak trend. A breakdown below 47,800 could accelerate bearish momentum toward the 47,500-47,000 zone.

Key Resistance: 49,000, 49,500

Key Support: 47,500, 47,000

Strategy: Sell Bank Nifty Futures below 47,800, with a stop-loss of 48,300, targeting 47,500 and 47,000.

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