Nifty 50 Recovery Falters Amid Market Uncertainty

Nifty 50 Shows Smart Recovery, Sustainability Remains Key Factor

The Nifty 50 showed a smart recovery in the second half after a gap-down opening, snapping its four-day losing streak to close with gains of 0.4 percent on June 2. This recovery was on expected lines, given the sharp selling pressure seen in recent sessions. However, sustainability remains the key factor to watch, considering the weak technical and momentum indicators.

The index broke below the May low at the opening itself, starting the session 150 points lower at 23,229, which also turned out to be the day's low. After consolidating during the morning session, the index recovered sharply around noon and maintained its upward trajectory through the second half before closing at 23,484, up 101 points from the previous closing level and 255 points from the day's low.

The 23,200 level is expected to act as immediate support for the Nifty 50. A fall below this level could drag the index down to 23,100 and then 22,700. On the upside, the 23,700–23,800 zone is likely to be a crucial resistance area, as only a sustained move above it can drive the index towards 24,000.

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The index had closed below the 50 percent Fibonacci retracement level of the April rally (23,400) in the previous session but failed to sustain below it in the following session, i.e., Tuesday, which is a positive sign.

Daily Chart Comparison

The daily charts of the Nifty 50 and Bank Nifty indicate buying interest at lower levels, but both indices remain below all key moving averages. The daily RSI of the Nifty 50 has rebounded to 42.95, reinforcing the RSI range-shift behaviour in a sideways market.

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The MACD remained below the reference line, with a further widening of the red bars in the histogram, while the Stochastic RSI continued to trend downward with a negative crossover. All these factors indicate a cautious undertone in the market.

Technical Analysis

According to Nilesh Jain, VP and Head of Technical and Derivative Research at Centrum Finverse, the index found strong support around the 23,230 mark, which now serves as an immediate support level, while the 50-DMA near 23,690 remains the key hurdle on the upside. He added that the broader market structure continues to remain range-bound, and a decisive move above 23,700 could trigger further upward momentum.

The weekly options data indicated that the 23,300 level, where the maximum Put open interest is concentrated, is expected to provide immediate support for the Nifty 50. Meanwhile, immediate resistance is seen at 23,500, followed by 24,000, both of which have attracted maximum Call open interest.

The volatility index, India VIX, declined 7.18 percent to 15.35 and slipped below all key moving averages, signalling some comfort for bulls. Any further moderation in volatility towards the 14–13 zone is likely to provide additional support to bullish sentiment.

Bank Nifty

The banking index also recouped losses from the day's low of 53,122 and closed 72 points higher at 53,715. The index managed to close marginally above the 50 percent Fibonacci retracement level of the April rally after having closed below it in the previous session. However, doubts remain over the sustainability of this move, given the weak technical indicators.

Notably, Bank Nifty continues to trade below all its key moving averages, indicating a cautious undertone in the near-term trend. The daily RSI has been moving within a sideways range for the past 38 trading sessions, reflecting a lack of directional strength and continued consolidation in the index.

Bank Nifty Resistance and Support

According to Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities, the 54,200–54,300 zone is expected to act as an immediate hurdle for the index. A sustained move above this zone could provide the required impetus for an upward move. On the downside, the 53,500–53,400 zone will serve as a crucial support area. A breach below 53,400 may intensify selling pressure and drag the index towards the next important support level around 52,800.