Nifty 50 Aims For A Bounce From Key Downside Support Levels

18,534 was the level that the Nifty 50 had to defend to ensure it does not report a weekly loss. It did manage to defend that level on Friday, but only just. Despite not reporting a weekly loss, the index closed near the lowest point of the day and has already shed more than 200 points from its recent swing high of 18,777, thereby prolonging the wait for its new all-time high.

The Nifty 50 is now nearing a zone where it has multiple supports on the downside. It has not had a close below 18,500 since May 26 and hence, that becomes a crucial support level. Although it has seen intraday dips below those levels, it has managed to recover from those on a closing basis.

With the RBI policy and earnings out of the way, the Nifty 50 will look towards global cues to determine the way forward. For this week, all eyes will be on the FOMC meet on June 13-14 and whether the US Federal Reserve does manage to put an end to its current rate hiking cycle, or continues to persist with a 25 basis points hike.

Gaurav Bissa of InCred Equities observed a bearish RSI divergence on the Nifty 50’s daily chart and that resulted in every rise getting rejected on the upside. He sees the next downside support for the Nifty 50 at levels of 18,440 – 18,450, which is the index’s 21-day exponential moving average.

Same is the case for the Nifty Bank index. 43,937 was the level it had to defend in order to ensure a weekly gain, which it did so, but only just. Not only did the index fall for the second day in a row, but also closed below the 44,000 mark, which is considered to be a key downside support for the index. However, Friday’s intraday low of 43,932 was higher than Thursday’s low of 43,917.

Kunal Shah of LKP Securities continues to maintain that 43,700 on the downside will be a key support for the Nifty Bank index, and it can attract buyers at that level if it sustains above it. On the upside, the resistance band between 44,300 – 44,500 continues to remain strong and is preventing the index from any meaningful upside. A break below either the support or resistance band can determine further direction on the index.

43,700 is where the Nifty Bank has its 21-day exponential moving average, which has lent support to the index since April, according to InCred’s Gaurav Bissa. He agrees to Shah’s point that a break on either side would be needed to determine further direction in the Nifty Bank index.

“The stock has been a laggard for the last 15 months,” said Sameet Chavan of Angel One. “Technically speaking, we do not seen any near-term relief in prices as the decline is backed by huge volumes. The stock is trading at a two-year low and we advise traders to stay away from the stock till things stabilise,” he added.

What Are The F&O Cues Indicating?

Let us take a look at the stocks that saw addition of fresh long positions on Friday, which is an increase in price and Open Interest:

Let us now take a look at the stocks which saw addition of fresh short positions, which is a decrease in price but increase in Open Interest:

Some stocks also saw unwinding of long positions on Friday, which means a decrease in price and Open Interest:

Here are the stocks to watch out for in Monday’s trading session:

What Are The Global Cues Indicating?

US markets had a subdued trading session on Friday but managed to post weekly advances yet again. All three indices ended with gains of just over 0.1 percent. The S&P 500 managed to close above the mark of 4,300 for the first time since August 2022.

The Dow Jones also gained for the fourth straight session. The Nasdaq gained for the seventh week in a row, a streak not seen since November 2019. The Dow and the S&P 500 gained between 0.3-0.4 percent on a weekly basis. All the action is now geared up for the FOMC meeting on June 13-14.

The Singapore-traded (SGX) Nifty futures, which are an early indicator of how the session would begin in India, are currently trading 52 points or 0.28 percent higher at 18,662, thereby pointing towards a mildly positive start to the trading session.

Foreign investors were net sellers on Friday and domestic investors were net buyers in the cash market. However, one must keep in mind that the numbers are influenced by the block deal in Kotak Mahindra Bank where the Canadian Pension Fund sold some of its stake.

Although the Nifty 50 has been consolidating, there is no dearth of action within the broader markets space, according to Angel One’s Sameet Chavan. For the index though, he believes 18,500 – 18,450 are a cluster of supports, while 18,680 – 18,780 will be a zone of resistance.

The undertone of the Nifty 50 index has turned sideways from bullish, according to LKP’s Shah. 18,500 remains a key support for the index, while 18,700 is now a major resistance. “A break on either side can lead to further trending moves in the index,” he said.