Indian Markets: A Technical Outlook for Nifty, Bank Nifty & Sensex on September 22nd

Indian Markets: A Technical Outlook for Nifty, Bank Nifty & Sensex on September 22nd

The Indian equity markets experienced a slight downward correction on Friday, September 19th, following a recent period of strong gains, with key benchmark indices concluding the trading session in negative territory. This pullback was largely driven by investors opting to book profits at higher valuation levels, particularly within the influential banking and consumer durables sectors. Despite this minor dip, the broader market trend maintained its overall integrity. The Nifty 50, for instance, successfully held its position above crucial moving averages, signaling a foundational strength that persists in the medium-term outlook. Market participants demonstrated a cautious and considered approach, anticipating upcoming global economic indicators and domestic policy announcements, which collectively fostered a sentiment that was a blend of mixed and moderately optimistic.

Sectoral Performance Highlights

In terms of sectoral performance, Public Sector Undertaking (PSU) banks and energy stocks distinguished themselves as leading performers. Their positive momentum was significantly boosted by favorable regulatory developments and robust buying interest from investors. A particularly noteworthy event was the sharp rally witnessed in Adani Group stocks. This surge occurred after the market regulator issued a favorable report, essentially clearing the Adani Group and its founder, Gautam Adani, in a stock manipulation case. This development instilled increased investor confidence within the energy and infrastructure segments. Conversely, private banking stocks exerted downward pressure on the overall indices, primarily due to selling activity observed in major financial institutions such as ICICI Bank and HDFC Bank. On the global front, weaker signals emanating from prominent Asian markets and subtle negative indications from US futures also contributed to the subdued tone of Friday’s trading session, although the overarching weekly trend managed to conclude on a positive note.

Nifty 50: Technical Levels and Outlook

The Nifty 50 Index opened Friday’s session with a negative bias, commencing at 25,410.20, a modest decline of 13.4 points from its previous closing value. During the morning, the index fell to an intraday low of 25,286. Notably, on the 15-minute timeframe, the Nifty 50 traded below its 20 and 50 Exponential Moving Averages (EMAs) but maintained its position above the 100 and 200 EMAs. The afternoon session witnessed a recovery from its daily lows, with the index managing to hold above the 25,300 level, although it ultimately closed the day in negative territory. The Nifty 50 concluded at 25,327.05, registering a loss of 96.55 points, or 0.38%. Significantly, on the daily timeframe, the Nifty 50 closed above all four EMAs (20, 50, 100, 200), reinforcing its medium-term bullish stance. For the upcoming trading sessions, immediate resistance levels are identified at R1 (25,360), R2 (25,436), and R3 (25,491). Correspondingly, immediate support levels are positioned at S1 (25,287), S2 (25,233), and S3 (25,187).

Nifty 50: Momentum and Derivatives Insights

A closer look at the momentum indicators for the Nifty 50 provides further clarity on its market position. The Relative Strength Index (RSI) on the daily chart stood at 63.71, indicating a bullish sentiment as it remains comfortably below the overbought threshold of 70. Bollinger Bands analysis reveals the index trading in the upper region of its band range, positioned above the middle band (Simple Moving Average). This position, coupled with robust support observed around the 25,330 level during Friday's session, suggests a bullish inclination. A sustained movement above the middle band would further validate this bullish sentiment. Volume analysis for Friday's trading session showed above-average volumes, totaling 380.36 million, indicating active market participation. From a derivatives perspective, Options Open Interest (OI) data points to strong Put writing at the 25,300 and 25,200 strike prices, establishing these as firm support zones. On the upside, a notable Call OI buildup at 25,400 and 25,500 suggests potential resistance levels. The Put/Call Ratio (PCR) stood at 0.8243 (below 1), which generally leans towards a bullish sentiment, further supported by a “long buildup” signal, reinforcing positive momentum and an overall bullish outlook for the subsequent trading session.

Bank Nifty: Key Levels to Watch

The Bank Nifty Index also commenced Friday’s session with a negative opening gap, starting at 55,647.95, a decrease of 79.5 points from its prior close. The index experienced a decline to an intraday low of 55,362. In the morning session, on the 15-minute timeframe, Bank Nifty traded between 55,350 and 55,700, maintaining its position above the 100 and 200 EMAs but remaining below the 20 and 50 EMAs. A rebound in the afternoon session allowed the index to recover from its daily lows, closing at 55,458.85, a loss of 268.60 points (0.48%), just beneath the 55,500 level. Importantly, Bank Nifty concluded the day above all four EMAs on the daily timeframe. For the coming days, immediate resistance levels are identified at R1 (55,534), R2 (55,836), and R3 (56,154), while key support levels are S1 (55,360), S2 (55,166), and S3 (54,954). The daily Relative Strength Index (RSI) for Bank Nifty was 57.56, indicating it is comfortably below the overbought threshold.

Sensex: Performance and Technical Landscape

Mirroring the broader market sentiment, the BSE Sensex Index opened with a negative bias at 82,946.04, a decrease of 67.92 points from its previous closing. Following a bearish start, the index touched an intraday low of 82,486 during the morning session. On the 15-minute timeframe, the Sensex traded between 82,486 and 82,979, positioned above the 100 and 200 EMAs but below the 20 and 50 EMAs. In the afternoon, the index recovered from its daily lows, trading above the 82,600 level, although it concluded the session with an overall bearish trend. The Sensex closed at 82,626.23, registering a loss of 387.73 points, or 0.47%. Similar to Nifty and Bank Nifty, the BSE Sensex closed above all four EMAs on the daily timeframe. For the upcoming sessions, immediate resistance levels are R1 (82,738), R2 (83,077), and R3 (83,381), with corresponding support levels at S1 (82,492), S2 (82,249), and S3 (81,993). The daily RSI for Sensex stood at 62.36, indicating healthy momentum below the overbought zone.

India VIX: Volatility Indicator

The India VIX, which serves as a key gauge of market volatility, experienced a marginal increase of 0.83% during Friday's session, moving from 9.88 to 9.97 points. Typically, an increase in the India VIX suggests an anticipation of higher price fluctuations and a potentially less stable market environment. However, with the India VIX remaining below the 15-point threshold, the market is broadly expected to maintain a relatively stable environment with minimal overall volatility, which can be seen as a reassuring factor for investors.

Trade Setup Summary for September 22nd

Considering the detailed technical analysis, the Nifty 50 concluded Friday's session at 25,327.05. A decisive break below the 25,287 support level could potentially trigger further selling pressure towards 25,233. Conversely, a convincing breach above the 25,360 resistance level might initiate a bullish movement targeting 25,436. The Bank Nifty ended the session at 55,458.85. A fall below 55,360 could lead to further declines towards 55,166, while a break above 55,534 could signal bullishness towards 55,836. Similarly, the Sensex, closing at 82,626.23, faces immediate support at 82,492; a move below this could extend selling to 82,249. Conversely, a rally past 82,738 could see it approach the 83,077 level. Given the ongoing volatility and mixed market sentiments, it is advisable for traders to exercise caution and avoid taking overly aggressive positions. A prudent strategy involves waiting for clear directional movements, either a convincing break above identified resistance levels or below established support levels. Additionally, incorporating moving averages into trading strategies can assist in pinpointing more accurate entry and exit points, thereby enhancing overall trading efficacy.

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