The Indian stock market witnessed a day for the history books on Tuesday. A surprise move by the US to lower tariffs on Indian goods triggered a massive 1,000 point gap up opening for the Nifty 50 index. But the euphoria settled as the index cooled off to close just above the 25,600 mark. Now all eyes turn to Wednesday morning to see if the bulls can defend the vital 20 EMA support level.
Global Cues Point To A Soft Start
Early indications from the GIFT Nifty futures suggest a slightly negative start for the Indian markets on Wednesday. The futures are trading roughly 60 points lower. This points to some profit booking after the volatile session we saw on Tuesday. Global markets remain mixed as investors digest the new trade dynamics between India and the US.
Traders should not be alarmed by a small gap down. It is natural for the market to consolidate after such a violent move. The key will be price action in the first hour of trade. If the index manages to absorb the selling pressure, we could see a recovery. However, weak global sentiment could add weight to the bears.
Key factors to watch in the morning session:
- GIFT Nifty trends before the opening bell.
- Asian market performance.
- US futures movement during Asian hours.
Impact Of US Tariff Cuts On Sectors
The primary driver for this sudden bullish sentiment is the lowering of tariffs by the United States. This is a game changer for several export heavy sectors in India. The IT services sector, pharmaceutical companies and textile manufacturers stand to gain the most. This explains why the rally on Tuesday was so broad based. Every major sectoral index closed in the green.
Analysts believe this policy shift will boost earnings for Nifty 50 companies over the next few quarters. The initial 1,000 point jump was a reaction to this long term positive structural change. However, markets rarely move in a straight line. The pullback from the highs suggests that smart money is waiting for prices to settle before adding fresh positions.
Investors should focus on stocks that have high exposure to the US market. These counters will likely outperform the broader index in the coming weeks. Dip buying in these specific sectors could be a prudent strategy.
Technical Setup And Key Levels
The technical picture has become extremely interesting after Tuesday’s candle. The index opened significantly higher but failed to sustain those highs. It closed about 400 points lower than its opening price. This formation often indicates some resistance at higher levels.
The 20 day Exponential Moving Average (EMA) is now the most critical support to watch. In a strong uptrend, the index usually respects this moving average. If the Nifty 50 can hold above this level on Wednesday, the path to 26,000 remains open. A break below the 20 EMA could invite further weakness.
Important Support and Resistance Levels:
| Level Type | Price Point | Significance |
|---|---|---|
| Resistance 1 | 26,000 | Psychological Barrier |
| Resistance 2 | 26,200 | Recent High |
| Support 1 | 25,500 | Immediate Support |
| Support 2 | 20 EMA | Trend Decider |
Traders need to be nimble. The volatility is expected to remain high. Avoid aggressive leverage until the market establishes a clear range for the week.
F&O Data Signals Caution
Derivatives data for the February 10 expiry provides more clues about the market sentiment. The Option Chain data shows significant activity at round numbers. The maximum Call Open Interest (OI) is currently placed at the 26,000 strike. This confirms that 26,000 will act as a stiff resistance wall for the bulls.
On the downside, the maximum Put OI is at 25,500. This suggests that put writers are confident the market will not fall below this level easily. The battleground for Wednesday is clearly defined between 25,500 and 26,000.
A breach of 25,500 could trigger long unwinding. That would push the index down towards the next support zones. Conversely, if short covering happens above 25,800, we might see a quick dash towards 26,000. Keep a close watch on the change in Open Interest throughout the live session.
Option Chain Highlights:
- PCR (Put Call Ratio): Indicates a neutral to slightly bullish stance.
- Call Writing: Heavy buildup at 26,100 and above.
- Put Writing: Aggressive support building at 25,400 and 25,500.
The market is currently in a buy on dips mode but only as long as key supports hold. The historic tariff news provides a fundamental floor to the price. But price action is king in the short term. Tuesday’s high volatility candle needs time to be digested.
The broader market participation is a healthy sign. Midcaps and smallcaps also joined the party on Tuesday. This indicates that the sentiment is not limited to just a few heavyweights. When the broader market participates, the rally tends to be more durable.
Tuesday’s historic move has reset expectations. The Nifty 50 has shown it has the energy to reclaim higher highs. The US tariff news is the fuel. Now we need to see if the technical structure can support this new fundamental reality. Wednesday will be a decisive day for the short term trend. Watch the 20 EMA like a hawk.
