Technical Analysis: Nifty 50 Consolidates Near 23,200-23,500 Ahead of Potential Breakout, Bank Nifty Gains Momentum

Nifty 50 Remains in Consolidation Phase

The Nifty 50 index continued its consolidation phase throughout the session on June 5, absorbing the RBI policy decision before closing 0.2 percent lower. Market sentiment remains weak, with the Relative Strength Index (RSI) at 40.64 sustaining below its signal line, and the index trading below all critical moving averages, indicating a lack of positive momentum and a cautious undertone in the short term.

According to experts, the index is expected to consolidate within the 23,200–23,500 range in the near term. A decisive breakdown below this range could drag the index below the 23,000 mark. However, a convincing move above the range could open the door for 23,700–23,800, followed by 24,000, which is expected to act as a crucial resistance level.

The Nifty 50 opened higher at 23,479 and climbed to an intraday high of 23,516 but erased its gains in the second half of the session and finished at 23,367, down 50 points (0.2 percent). On the daily charts, the index formed a bearish candle with minor upper and lower shadows, indicating weakness amid range-bound trading and a lack of strong directional momentum.

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For the week, the index declined 0.77 percent, extending its weakness for another week, and formed a bearish candle with a sizeable lower shadow on the weekly timeframe. Furthermore, the index remained below all key moving averages except the 200-day Exponential Moving Average (EMA), indicating persistent pressure.

The ongoing range-bound price action over the last four sessions suggests indecisiveness among market participants, with buyers emerging at lower levels while sellers continue to cap gains at higher zones. The Moving Average Convergence Divergence (MACD) remained below both the signal and zero lines, with a sizeable red bar on the histogram for the fifth consecutive session.

According to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, the underlying trend of the Nifty remains choppy with a positive bias.

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The India VIX remained in negative territory for another session, falling 0.61 percent to 15.79, which is supportive for bulls. A sustained decline below the 15 mark could bring bulls back into stronger action.

Bank Nifty Outperforms Nifty 50

The Bank Nifty outperformed the Nifty 50 for the fourth consecutive session, rising 188 points to close at 54,496. The index formed a small-bodied bullish candle with upper and lower shadows on the daily timeframe, indicating indecision between bulls and bears.

The banking index managed to close above its short-term moving averages as well as the 38.2 percent Fibonacci retracement level of the correction from the February high to the April low (54,422). However, it remained below its medium- and long-term moving averages. The RSI crossed above the 50 mark to 50.15 and maintained its upward trajectory, while the MACD sustained its bullish crossover with further expansion in the green histogram bar. All these indicators point to improving momentum in the near term.

For the week, the index formed a small-bodied bullish candle with a long lower shadow and a minor upper shadow on the weekly timeframe, reflecting healthy buying interest at lower levels despite some pressure at higher levels. The index continued to trade below its short- and medium-term moving averages, both of which remain in a downward trend. The RSI, at 44.32, witnessed a bullish crossover, while the MACD remained below its signal line. However, the red histogram bar shrank for the third consecutive week, indicating that bearish momentum is gradually easing.

According to Sudeep Shah, Head – Technical and Derivatives Research at SBI Securities, the 54,100–54,000 zone will act as immediate support for the index. On the upside, the 55,000–55,100 zone will act as a crucial hurdle. Any sustained move above 55,100 could trigger a short-covering rally towards the 55,400 level.