Nifty 50, Bank Nifty May Experience Temporary Reprieve Following Five-Day Rally

Market Extends Upward Journey

After five consecutive sessions of upward movement, the market may be due for a small breather, a phase of consolidation before continuing its upward journey. Technical indicators signal strengthening momentum, with the index negating the lower high–lower low formation and VIX falling sharply. The index needs a decisive close above the psychological 24,000 zone for a move toward the 24,300–24,500 levels. However, the 23,900–23,800 range is expected to be immediate key support.

On April 8, the Nifty 50 spiked 874 points (3.78 percent) to 23,997, while the Bank Nifty surged 2,988 points (5.67 percent) to 55,704, with strong market breadth. A total of 2,795 shares saw buying interest compared to 250 shares that were under pressure on the National Stock Exchange.

Nifty Outlook and Strategy

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The benchmark index, Nifty, extended its pullback rally on Wednesday following the announcement of a two-week ceasefire between the US and Iran. From the recent swing low of 22,182, the index staged a swift recovery of more than 1,800 points (8.19 percent) within just four trading sessions. Notably, the index has recorded positive closes for the fifth consecutive session, marking its longest winning streak since the onset of the US-Iran conflict. Alongside this recovery, market participation has broadened meaningfully, with market breadth showing significant improvement, reflecting increased buying interest across broader segments.

Technical Analysis

The Nifty has decisively moved above its 20-day EMA for the first time since February 23, signalling a short-term trend reversal. Momentum indicators have also witnessed a sharp turnaround. The daily RSI is currently hovering near the 54 level and continues to trend upward, highlighting strengthening bullish momentum. Meanwhile, the fast stochastic has surged above the 80 mark and remains in a rising mode, indicating strong price momentum. Additionally, the MACD histogram has sustained above the zero line for the last three trading sessions, suggesting improving trend strength and a positive momentum bias.

Volatility and Risk Sentiment

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On the volatility front, the India VIX has cooled off sharply, declining by more than 20 percent, which indicates a notable reduction in market fear and uncertainty. This contraction in volatility further supports the ongoing improvement in risk sentiment and increases the possibility of consolidation with a positive bias in the near term.

Trading Strategy

Considering the prevailing chart structure and the improving momentum setup, we believe the Nifty is well positioned to extend its ongoing pullback rally in the near term. On the upside, the Nifty is likely to test the 24,300 level initially, followed by 24,500. A sustained hold above these levels could further strengthen the bullish bias.

Bank Nifty Outlook and Positioning

The banking benchmark index has also continued to demonstrate strong follow-through in its pullback rally. From the recent swing low of 49,954, the index has staged an impressive rebound of over 5,800 points, translating into a sharp upside of 11.63 percent in a short span. This strong recovery highlights renewed buying interest in frontline banking stocks and improving risk appetite across the financial space.

Technical Analysis

Bank Nifty has decisively crossed above its 20-day EMA for the first time since February 27, indicating a short-term trend reversal. Momentum indicators, too, have witnessed a strong pullback, reinforcing the bullish undertone and suggesting that the recovery is supported by improving internal strength rather than just short covering.

Trading Strategy

Considering the current chart structure and strengthening momentum indicators, the Bank Nifty is likely to continue its pullback rally in the near term. On the upside, Bank Nifty is expected to move towards 56,500 initially, followed by 57,200, which are placed at key resistance levels.

Comparison of Nifty and Bank Nifty

Trading Strategies

• Buy Nifty Futures on dips between 23,950–24,100, with a stop-loss of 23,780, targeting 24,450.
• Buy Bank Nifty Futures between 55,700–56,000, with a stop-loss of 55,200, targeting 57,000.
• Buy Bank Nifty April 57,000 CE at Rs 550, with a stop-loss of Rs 425, targeting Rs 750.