Momentum Indicators Suggest Easing Bearish Sentiment in Indian Markets: Nifty Eyes Potential Breakout Above 24,000, Bank Nifty Climbs Above 54,000

Nifty 50 Fails to Sustain Above Crucial EMA Level

The Nifty 50 remained in positive territory throughout the session on May 22 and closed higher with gains of 0.27 percent, but failed to sustain above the 20-day EMA (near 23,800) on a closing basis for the second straight day. This is a crucial level for the next leg of the upmove in the market.

Considering the supportive signals from momentum indicators, which pointed to a gradual weakening in the bearish trend, if the index convincingly reclaims and sustains above the 20-DEMA next week, the 24,000 and 24,300 levels will be the ones to watch. However, sustaining below it may keep the index in a consolidative mode, with immediate crucial support placed in the 23,500-23,400 zone, according to experts.

The benchmark index opened moderately higher at 23,671, which was also the day's low, and maintained a positive tone throughout the session. The index hit an intraday high of 23,836 in the middle of the session before closing at 23,719, up 65 points (0.27 percent). Overall, it traded within the previous day's range.

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On the daily charts, the Nifty 50 formed a bullish candle with an upper shadow beside Thursday's negative candle and closed above the 10-day EMA for the first time since May 6, while continuing its higher-low formation, indicating improving sentiment despite some profit-booking pressure at higher levels amid choppy trade.

The index remained below the 20-, 50-, 100- and 200-day EMAs, but the RSI climbed to 47.19 and is on the verge of a positive crossover. The MACD remained below the reference and zero lines, but the gap between the MACD and signal lines has been narrowing, which is reflected in the consistently shrinking red histogram bars for the seventh consecutive session. All this indicates weakening bearish momentum and improving market sentiment.

For the week, the Nifty 50 ended with gains of 0.32 percent after a 2.2 percent loss in the previous week, forming a bullish candle with upper and lower shadows on the weekly timeframe. The index defended the previous week's low and also moved back above the 38.2 percent Fibonacci retracement of the April rally. All this indicates improving resilience in the broader trend despite continued range-bound movement.

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According to experts, a decisive breakout from the range (23,300-23,800) is essential for the next leg of the rally or correction to unfold. On the downside, immediate support is placed at 23,600, below which the index may drift towards 23,400. A breach below 23,400 could trigger a sharper correction in the market.

On the higher side, a decisive move above 23,800 may trigger a fresh directional upmove in the short term.

The monthly options data continued to signal that 24,000 remains a crucial resistance level for the Nifty 50, as it holds the maximum Call open interest, while 23,800 remains the immediate hurdle. On the other hand, the 23,500 strike, which has the maximum Put open interest, is expected to act as key support.

The India VIX, the fear index, remained unchanged at 17.82 after witnessing a highly choppy move within the 16.5-19 range during the day and stayed below its short- and medium-term moving averages. Any decisive and sustainable move below the 16 level is necessary for bulls to regain comfort.

The banking index, Bank Nifty, outperformed the benchmark Nifty 50 and rallied 616 points (1.15 percent) to 54,055, supported by robust buying in the private banking space.

On the daily timeframe, the index formed a bullish candle beside the previous day's red candle. The index closed above the 10-day EMA for the first time since May 7, but still remained below the 20-, 50-, 100- and 200-day EMAs. In fact, the 20-day EMA has now flattened out, while the Bank Nifty decisively climbed back above the 50 percent Fibonacci retracement of the April rally, which is a positive signal.

The RSI rose to 45.87 with a bullish crossover, while the MACD's red histogram bar shrank for the fifth consecutive session. All this indicates easing bearish pressure and improving momentum.

According to Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities, the immediate resistance for Bank Nifty is placed in the 54,400-54,500 zone. Any sustainable move above this zone could result in Bank Nifty extending its pullback towards 54,900, followed by 55,300 in the short term.

On the downside, the immediate support for Bank Nifty is placed in the 53,600-53,500 zone, he said.

For the week, the banking index gained 0.64 percent and formed a bullish candle with a lower shadow on the weekly charts, signalling healthy recovery, but the lower high-lower low formation continued for the fourth consecutive week.