Nifty 50 and Bank Nifty Seen Testing Thursday's High Amid Consolidation

Market Remains Trapped in Narrow Consolidation Range

The Indian market is expected to continue its narrow consolidation range of 23,300-23,850 until it gives a decisive close on either side for further direction. Momentum and trend indicators suggest range-bound action, with the Nifty 50 attempting a rebound toward the 23,750-23,850 zone but requiring a sustainable close above 23,800 for a further rally toward 24,000.

Market Performance on May 21

On May 21, the Nifty 50 fell 4.3 points to 23,655, while the Bank Nifty slipped 123 points to 53,439. However, market breadth remained positive, with about 1,711 advancing shares against 1,237 declining shares on the National Stock Exchange.

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Nifty Outlook and Strategy

According to Dhupesh Dhameja, Derivative Research Analyst at Samco Securities, the Nifty continued to witness a volatile and range-bound session, reflecting a cautious undertone in the broader market. The benchmark remains below the falling 20-DEMA near 23,800, indicating weak short-term momentum and continued supply pressure on recovery attempts.

The 23,750-23,850 zone remains a strong resistance area, while buyers continue to defend the 23,500-23,300 support band, keeping the index trapped in a narrow consolidation range. The RSI near 45.55 reflects subdued momentum and a lack of aggressive buying participation.

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From a derivatives perspective, heavy Call writing near 23,800-24,000 continues to cap upside momentum. Till the time the index sustains below resistance levels, a slightly cautious bias with a "sell on rise" strategy remains favourable for the current market setup.

Strategy: Bear Put Spread

Traders may consider the Bear Put Spread for the May 26 expiry by selling one lot of 23,400 PE at Rs 83 and buying one lot of 23,550 PE at Rs 137. This strategy is designed to capitalise on a potential bearish setup.

Stop-Loss and Target

Hold this strategy strictly, with the maximum Mark-to-Market (MTM) loss capped at Rs 3,510 to ensure disciplined risk management. Aim for a maximum Mark-to-Market (MTM) profit target of Rs 6,240, while considering profit booking once MTM gains exceed Rs 3,500.

Nifty Analysis by Jay Mehta

Nifty has been trading in a tight range of 23,300-23,850 for the past eight sessions after breaking below key support on May 12. Notably, there has been no strong follow-through selling post-breakdown, leading to consolidation within this range. The price continues to trade below all key moving averages and is currently hovering around the 50 percent Fibonacci retracement of the April rally.

Momentum and trend indicators suggest range-bound action or a mildly negative bias in the near term until a decisive break above 23,850. On the weekly chart, the structure remains weak. The bias stays cautiously positive as long as the 23,300 support holds.

Key Resistance and Support

Strategy: Wait for a Breakout

Wait for a clear breakout from the 23,300-23,850 range for the next 200-300-point directional move in the Nifty 50.

Bank Nifty - Outlook and Positioning

According to Dhupesh Dhameja, Derivative Research Analyst at Samco Securities, the Bank Nifty continued to witness a subdued and range-bound session, as the index struggled to sustain recovery momentum near higher levels. The index remains below the falling 10-DEMA near 53,900, indicating a weak short-term structure and persistent supply pressure on every pullback rally.

Strategy: Short Guts

Traders may consider the Short Guts strategy for the May 26 expiry by selling one lot of 53,300 CE at Rs 629 and selling one lot of 53,800 PE at Rs 602. This setup is designed to capitalise on potential range-bound movement.

Stop-Loss and Target

Hold this strategy strictly, with the maximum Mark-to-Market (MTM) loss capped at Rs 11,000 to ensure disciplined risk management. Aim for a maximum Mark-to-Market (MTM) profit target of Rs 21,997, while considering profit booking once MTM gains exceed Rs 11,000.

Bank Nifty Analysis by Jay Mehta

Bank Nifty is structurally weaker than the Nifty and has been consolidating in a narrow range of 52,700-54,450 for the past eight sessions. The price remains below all key EMAs, reflecting inherent weakness. It is currently positioned near the 61.8 percent Fibonacci retracement of the April rally. Momentum and trend indicators point toward continued range-bound or mildly negative movement until a decisive break above 54,450.

Strategy: Wait for a Breakout

Wait for a clear breakout from the 52,700-54,450 range for the next 800-1,000-point directional move.

Market Outlook

The overall price action across benchmark indices suggests a phase of consolidation with intermittent profit booking at higher levels. Despite easing volatility, the inability of the indices to sustain near the day's highs indicates cautious undertones in the broader market. Traders are advised to closely monitor key support and resistance levels, as a decisive breakout or breakdown from these zones may determine the next directional move.