The Nifty 50 retreated after Friday's sharp rally, ending 0.4 percent lower on July 20 and marking a negative start to the week amid ongoing Middle East tensions and volatile oil prices. Despite the range-bound market, the index remained above its 100-day EMA for the second consecutive session and continued to hold above its short- to medium-term moving averages, signalling underlying strength.
Going forward, the index needs to reclaim and sustain above the 24,350-24,400 zone (near Friday's high and the 200-day EMA), which could increase the possibility of a further upmove towards the 24,800-25,000 zone. Until then, range-bound trading and consolidation are likely to continue, with immediate support at 24,200, followed by the key support level of 24,000 (close to the 50-day EMA and the previous week's low), according to experts.
The Nifty 50 opened 144 points lower and remained under pressure below the 24,300 mark throughout the session. The index touched an intraday low of 24,136 and a high of 24,266 before closing at 24,239, down 96 points, or 0.39 percent.
On the daily chart, the Nifty formed a small-bodied green candle with upper and lower shadows and closed within the previous session's range, reflecting continued indecision. Meanwhile, momentum indicators continued to signal range-bound price action.
"The market's trading range has narrowed, but a decisive breakout is still awaited. The key levels to watch remain 24,000 on the downside and 24,350 on the upside," said Shrikant Chouhan, Head of Equity Research at Kotak Securities.
According to him, as long as these levels remain intact on a closing basis, stock-specific action is likely to dominate. A close below 24,000 could open the door for a decline towards 23,800, while a sustained move above 24,350 may pave the way for a retest of 24,500.
The preferred strategy is to reduce weak long positions in the 24,350-24,450 zone while remaining selective in accumulating quality stocks on declines, Shrikant advised.
The weekly options data indicated that the 24,200 and 24,000 strikes, which hold the maximum Put open interest, could act as a support zone in the short term. However, the 24,300-24,500 strikes, where the maximum Call open interest is concentrated, could remain a hurdle for the index.
Meanwhile, the India VIX declined 1.29 percent to 12.98 and remained below its key moving averages, which is supportive for bulls. Overall, the volatility index is not signalling any major risk for the market as long as it remains below the 15 mark. A decisive fall below 12 would provide additional comfort to the bulls.
Bank Nifty
The banking index also gave up part of Friday's gains, declining 576 points, or 0.98 percent, to close at 57,945. It formed a small-bodied bullish candle with wicks on either side, highlighting intraday indecision. Going ahead, a meaningful upside is likely only if the index manages to close sustainably above the 58,600-58,700 zone. Until then, range-bound trading may continue.
Despite the choppy intraday movement, Bank Nifty found support at its 20-day EMA and remained above all key moving averages, indicating that the broader trend continues to remain positive despite the ongoing consolidation.
"The immediate resistance for Bank Nifty is placed in the 58,300-58,400 zone. Any sustainable move above this zone could result in Bank Nifty extending its pullback towards 58,800, followed by 59,200 in the short term," said Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities.
However, on the downside, the immediate support for Bank Nifty is placed in the 57,600-57,500 zone, he added.