Nifty 50 and Bank Nifty Outlook: Support, Resistance, and Market Impact

Nifty 50 Analysis

After a sharp correction, Nifty 50 has formed a Bearish Engulfing pattern on the weekly charts (as of September 6), signaling a potential reversal of the recent uptrend. Profit booking is seen as a healthy consolidation phase amidst the broader bullish outlook, but technical indicators now show a cautious scenario.

Key Resistance Levels:

The 25,000 mark serves as a crucial resistance zone for Nifty. A break above this level could lead to buying pressure, pushing the index toward 25,250 and 25,400 levels. However, without a definitive breakout, it is unlikely that Nifty will reclaim its upward momentum.

Key Support Levels:

Nifty’s immediate support is at 24,750. A drop below this could invite further selling pressure, potentially driving the index down to 24,600 and 24,450. If the selloff continues, Nifty could even test the next critical support at 24,472.

Short-term Strategy:

Based on technical signals, a sell strategy around 24,900-25,000 could be ideal with a stop loss at 25,150, aiming for a target of 24,600 to 24,500. This aligns with the bearish divergence seen on the RSI, which indicates more downside in the near term.

Weekly Range:

For the week, Nifty is expected to trade between 25,400-24,400. The RSI has turned negative, pointing to continued weakness, while the options market shows a shift in PE positions from 24,800 to 24,500, reinforcing the likelihood of further correction.

Bank Nifty Analysis

Bank Nifty, similar to Nifty, has shown bearish tendencies with a Bearish Engulfing candlestick pattern on the weekly chart, indicating selling pressure. The index has dropped significantly, with technical indicators suggesting a continuation of weakness unless it reclaims key levels.

Key Resistance Levels:

Bank Nifty's immediate resistance is at 50,900. A break above this level could initiate buying, pushing the index toward 51,250 and 51,500. If the resistance holds, the index is expected to remain under pressure.

Key Support Levels:

On the downside, 50,350 acts as the immediate support, with further downside targets at 50,250 and 50,000. If the index fails to hold above 50,350, there could be further aggressive selling.

Short-term Strategy:

Selling Bank Nifty around 50,850 with a stop loss at 51,000 and targets around 50,400 to 50,300 seems prudent, given the negative bias and declining RSI.

Weekly Range:

For the upcoming week, Bank Nifty is expected to trade within the 51,500-50,000 range. A break below 50,000 could extend the correction further.

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Global Market Impact

US Markets:

• The Nasdaq fell 2.55% yesterday, signaling risk aversion in global equity markets, particularly in the tech sector. This decline could weigh on sentiment in the Indian markets as well, adding pressure to the already bearish outlook for both Nifty and Bank Nifty.

Asian Markets:

• As of this morning, GIFT Nifty is down 0.32%, reinforcing the cautious tone in the Indian market. The broader Asian markets are reflecting weakness, following global cues from the US and Europe.

European Markets:

• European markets have faced significant declines, exacerbating concerns of a global market correction. A sharp sell-off in these markets could further dampen investor sentiment, adding to the volatility in Indian indices.

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Conclusion

With global markets under pressure and key support levels being tested, Nifty and Bank Nifty are likely to remain volatile in the short term. For Nifty, 24,600-24,450 is the key support zone to watch, while 50,350 will be critical for Bank Nifty. Both indices face stiff resistance near 25,000 and 50,900, respectively, and a failure to break these levels will likely keep the market in correction mode.