Nifty week ahead: Range-bound market will look for direction ahead of budget

Market


It was another volatile week in a narrow range; however, we have seen damage in many individual stocks while some stocks managed to outperform. The Nifty range is getting narrower, and Nifty may try to break out of this range next week ahead of the union budget. 

Next week will be a shortened week because the market will be closed on Thursday for Republic Day; thus, the January month F&O expiry is scheduled for Wednesday, which may cause market volatility. Global cues are also volatile and lack direction, but any major swing in the global market may also impact our markets. FIIs’ selling has slowed down in the last few days following aggressive selling in the first half of this month, but institutional flows will remain crucial for the direction of the market. Q3 earning season is going on, therefore stock and sector-specific moves will continue.

Technically, Nifty is trading in a well-defined trading range of 17800-18250, but it is getting narrower, so we can expect a breakout or breakdown. The move is similar to what happened in 2022, when Nifty formed doji candles in the second and third weeks of January before exploding in the fourth week ahead of the budget. 

On the upside, if Nifty manages to take out the 50-DMA of 18250, then we can expect a rally towards 18500 and 18650 levels. On the downside, a cluster of 20 and the 100-DMA of 18040–17940 is an immediate demand zone, while 17800 is a sacrosanct support level. If Nifty slips below the 17800 level, then 17625 and 17425 will be the next support levels.

Bank Nifty is also in a well-defined trading band of 41725–42725; it needs to take out this band for further direction. If it breaks out above 42725, it is likely to move towards the 43500 and 44000 levels. On the other hand, any major weakness will be seen only with a decisive move below the 41725 level.

The FIIs’ long exposure in index futures is near 50%, indicating a neutral position; however, a put call below 1 suggests the possibility of a short covering move. According to OI distribution, there is a fierce battle between bulls and bears around 18000 levels for Nifty, while 42500 put writers are betting on the bullish side in Bank Nifty.

Santosh Meena is head of research at Swastika Investmart Ltd.


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