Dalal Street is gearing up for a crucial trading session today. The bulls are looking to stage a comeback after a punishing sell-off on Friday. Early indicators from the GIFT Nifty suggest a positive start with a gain of 75 points. Investors are returning to their terminals after the Republic Day holiday break. The market sentiment remains fragile despite the positive global cues. All eyes are now fixed on the upcoming Union Budget which is keeping the volatility levels high.
Technical Setup Shows Bears Are Still in Control
The technical landscape for the Indian benchmark indices looks precarious. The Nifty 50 index suffered a significant blow during the previous trading session. It slipped 241.25 points to close at 25,048.65. This closing level is psychologically damaging for the bulls.
Market experts are worried about the recent price action. The index has slipped below its 200-day Daily Moving Average (DMA) on a closing basis. This is a classic bearish signal in technical analysis. It often indicates that the long-term uptrend is under serious threat.
Rupak De is the Senior Technical Analyst at LKP Securities. He noted that the index failed to defend the crucial long-term moving average. He pointed out that the Nifty stayed below the 20 Exponential Moving Average (EMA) on the hourly chart. This confirms that the bears are selling into every minor recovery.
Key Technical Observations:
- Trend: Downward bias in the short term.
- Momentum: Weak, with aggressive selling at higher levels.
- Signal: The breakdown below 200 DMA suggests capitulation by the bulls.
The sentiment is likely to remain weak as long as the index trades below the 25,500 mark. Traders should be cautious about aggressive long positions until this resistance is reclaimed.
Volatility Spikes as Union Budget Draws Closer
Fear is creeping back into the minds of traders. The India VIX is widely known as the fear gauge of the market. It surged by 6.31 percent to settle at 14.19 levels on Friday. This spike indicates that market participants are expecting sharp swings in the coming days.
The upcoming Union Budget is the primary trigger for this nervousness. Finance events usually bring uncertainty regarding tax changes and fiscal policies. Traders are rushing to hedge their portfolios against potential downside risks.
Why VIX Matters Now:
- A rising VIX usually limits the upside potential for stocks.
- It increases the premiums for option buyers.
- It signals that smart money is expecting a major move.
Investors should brace themselves for a roller-coaster ride this week. The market usually stays volatile in the days leading up to the Finance Minister’s speech. Sector-specific rotation will be the key theme to watch. Stocks in the infrastructure and banking sectors might see increased activity.
Global Cues and Foreign Investor Activity
The domestic cues are weak but global markets are offering some support. Asian markets opened on a mixed note this morning. However, the positive trading in the GIFT Nifty indicates that foreign investors might cover some shorts.
Foreign Institutional Investors (FIIs) have been relentless sellers in the Indian market. Their consistent selling has put pressure on the banking and financial services stocks. Domestic Institutional Investors (DIIs) have been buying but they cannot absorb the entire selling pressure.
Market Participants Watchlist:
| Metric | Trend | Impact |
|---|---|---|
| US Markets | Stable | Neutral to Positive |
| Asian Peers | Mixed | Neutral |
| Crude Oil | Rangebound | Positive for India |
| Dollar Index | Steady | Neutral |
Traders need to keep a close watch on the FII flows today. A reversal in their selling streak could trigger a sharp short-covering rally. However, continued selling will likely push the Nifty towards the next support zone.
Crucial Support and Resistance Levels to Watch
The trading strategy for today must be defensive. The primary trend is down despite the expected gap-up opening. Experts suggest that any bounce should be used to lighten positions in weak stocks.
Support Levels:
The immediate support for Nifty is placed at 24,700. A breach of this level could open the gates for a further slide. The bears will target the 24,500 zone if the selling pressure intensifies.
Resistance Levels:
The upside is capped at 25,500. This is the stiff resistance zone that bulls need to conquer. A sustained trade above this level is necessary to change the short-term sentiment.
Trading Tips for the Day:
- Avoid Aggressive Buying: Don’t chase the gap-up opening blindly.
- Watch the First Hour: The price action in the first 60 minutes will dictate the trend.
- Stick to Stop Losses: Volatility can hit stops on both sides.
- Focus on Large Caps: Midcaps and smallcaps might face more selling pressure.
The banking index also looks weak on the charts. It has underperformed the benchmark Nifty in recent sessions. A recovery in banking stocks is essential for any sustainable pullback in the broader market.
The market is currently at a make-or-break level. The battle between the bulls and bears will be fierce today. The gap-up opening provides a glimmer of hope. But the technical structure demands caution. Investors should focus on capital protection rather than chasing high returns in this volatile environment. The budget week is notorious for trapping unsuspecting retail traders. Stay disciplined and follow your trading plan strictly.
