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The Indian equity market exhibited a strong bullish trend in the days leading up to the Union Budget presentation on February 1st. The Nifty 50 index, a key benchmark, experienced relentless buying interest over four consecutive days, culminating in a gain exceeding 1 percent on January 31st. This surge in optimism reflects positive market sentiment ahead of the crucial budget announcement. The index's performance on Friday, the start of the February series, further reinforced this bullish trend. The Nifty 50 successfully surpassed short-term moving averages and broke through a strong resistance trendline, accompanied by above-average trading volumes. This technical analysis suggests a continuation of the upward trajectory. However, potential hurdles exist. If the upward momentum continues, the immediate resistance zone lies between 23,620 and 23,680, encompassing the 200-day and 50-day exponential moving averages (EMAs). Further resistance is anticipated in the 23,800-23,900 range, coinciding with a trendline resistance and the 100-day EMA. Conversely, a trend reversal could see immediate support at 23,300, with a more crucial support level at 23,000, as indicated by market experts. The market's opening on a Saturday, February 1st, for the Budget presentation, is a notable factor influencing trading activity.
A detailed breakdown of key technical indicators and options data provides a more nuanced picture of the market's current state. For the Nifty 50 (closing at 23,508), pivot point analysis suggests resistance levels at 23,547, 23,611, and 23,714, while support is anticipated at 23,341, 23,278, and 23,175. The index exhibited its most significant single-day gains since January 2nd, forming a long bullish candlestick pattern. This, combined with the closing price exceeding the January 21st lower high (23,426), suggests a reversal of the bearish pattern of lower highs and lower lows observed during the preceding month. The Relative Strength Index (RSI) at 52.17 entered the upper band with a positive bias, while the Moving Average Convergence Divergence (MACD) showed a positive crossover, although it remained below the zero line. Hourly charts reveal the index climbing above all major moving averages, with positive RSI and MACD biases. The weekly timeframe shows a close above the 50-week EMA and a robust bullish candle engulfing the previous two weeks' candles, a highly positive signal. This comprehensive analysis paints a clear picture of the bullish momentum in the Nifty 50.
The Bank Nifty index (closing at 49,587) mirrors the bullish trend observed in the Nifty 50. Pivot point analysis indicates resistance levels at 49,677, 49,829, and 50,074, and support levels at 49,186, 49,034, and 48,788. Fibonacci retracement analysis further suggests resistance at 50,381 and 51,158 and support at 47,875 and 46,078. The Bank Nifty formed a bullish candlestick pattern, maintaining its upward trend and higher low formation for the fourth consecutive session. A 0.6 percent gain sustained the index above short-term moving averages (10 and 20-day EMAs), with above-average volumes continuing for five consecutive days. The weekly timeframe shows a remarkable 2.52 percent surge, the largest weekly gain since the first week of December 2024, forming a large bullish candle engulfing the previous two weeks. This significant positive development further underscores the strong bullish sentiment. The analysis of options data provides further insights into potential market movements. For the Nifty, the 24,000 strike price in weekly call options holds the maximum open interest (77.11 lakh contracts), indicating potential resistance. Put options show maximum open interest at the 23,000 strike (56.53 lakh contracts), signifying a key support level. Similar analysis for Bank Nifty options data reveals key resistance and support levels based on open interest and writing activity.
The market sentiment indicators provide additional context for understanding the prevailing market dynamics. The Nifty Put-Call Ratio (PCR) increased to 1.01 on January 31st, up from 0.97 the previous session. A PCR above 0.7 or exceeding 1 generally suggests a bullish sentiment, indicating more Put option selling than Call option selling. Conversely, a PCR below 0.7 indicates a bearish mood. The India VIX, a measure of market volatility, dropped 6.57 percent to 16.25, favoring bullish sentiment. However, caution is warranted, as the VIX remains above 14, signifying potential volatility near the Union Budget. Further analysis shows a long build-up in 78 stocks, reflecting increased long positions with rising open interest and prices. Conversely, 14 stocks experienced long unwinding, 25 stocks saw short build-ups, and 110 stocks showed short-covering. The data on high delivery trades highlights stocks with strong investment interest. Finally, no changes were observed in the list of securities banned under the F&O segment.
In conclusion, the market is currently demonstrating strong bullish signals heading into the Union Budget. Both the Nifty 50 and Bank Nifty indices show significant positive momentum, supported by technical indicators and options data. While potential resistance levels exist, the overall trend points towards a continuation of the upward movement. However, the India VIX remains above 14, indicating potential volatility, and traders should exercise caution. It's crucial for investors to conduct their own thorough research and consider consulting with financial advisors before making any investment decisions. The information provided here is for informational purposes only and should not be construed as financial advice.
Source: Trade setup for Budget Day: Top 15 things to know before the opening bell