Nifty Faces Key Resistance at 23,270; Sudeep Shah Shares Market Insights

The Indian stock market managed to end Friday's session on a positive note, recovering slightly after a recent sharp dip that unsettled investors. The Sensex gained 315 points to close at 73,896, while the Nifty 50 added 77 points to finish at 23,140.50. Despite these gains, the broader market showed a mixed picture with the Nifty Midcap 100 index trading lower, whereas the Nifty Smallcap 100 index posted gains.

Sudeep Shah, Vice President and Head of Technical & Derivatives Research at SBI Securities, spoke with ETMarkets to provide his outlook on the Nifty, options market activity, and sector-specific strategies for the upcoming week. Below is an edited summary of his insights.

Market Performance and Nifty Outlook

The Nifty index has experienced a challenging stretch, slipping 1% during the week and hitting eight consecutive daily losses for the first time in recent memory. This marks its longest weekly losing streak since the COVID-19 downturn in 2020. Shah attributed this weakness to rising US 10-year bond yields, which have reached levels not seen since 2007, and increased volatility in Brent crude oil prices. These global factors continue to dampen investor sentiment and put pressure on Indian equities.

Technically, the Nifty is trading about 3% below its 50-day exponential moving average (EMA) and nearly 4% under its 100-day EMA, both of which are trending downward. The daily Relative Strength Index (RSI) has repeatedly been resisted near the 40 mark and is currently declining, signaling a shift into a bearish range. Momentum indicators such as the Moving Average Convergence Divergence (MACD) also remain negative, with the MACD histogram staying below zero for 30 straight trading sessions. This prolonged negative momentum is significant and suggests caution going forward.

Looking ahead, the 23,270 to 23,300 zone will be a critical resistance area for the index. Unless the Nifty can reclaim levels above 23,300, the downward trend may persist, potentially driving the index down to support levels near 22,800 and possibly 22,600.

Bank Nifty Trends

The Bank Nifty index has also been under pressure, closing lower for five weeks in a row and recently breaking below its recent swing low. It continues to trade below its key short- and medium-term moving averages, including the 20-day, 50-day, and 100-day EMAs, all of which are trending downward. The daily RSI remains range-bound between 33 and 46, reflecting a lack of strong bullish momentum.

Support is expected around the 55,100 to 55,000 range, which aligns with a 61.8% Fibonacci retracement level from the previous uptrend. A clear break below 55,000 could accelerate selling pressure and push the index toward 54,400 in the near term. On the upside, resistance lies between 56,000 and 56,100. Bank Nifty’s broader trend will likely stay bearish unless it can break above this resistance band.

Insurance Stocks Under Pressure

The insurance sector faced significant declines recently. Policybazaar (PB Fintech) dropped sharply by 36% on September 24, disrupting its chart structure and pushing it below key moving averages. Its RSI plummeted to 24 from 61, indicating strong bearish momentum, while the MACD has turned negative. The stock’s critical support area between Rs 1,150 and Rs 1,160, where it had previously bounced in May 2024, will be important to watch. A decisive break below this zone could lead to further declines.

Turtlemint’s stock also faced a steep fall of nearly 40% over two sessions and now trades considerably below its initial listing price. The Average Directional Index (ADX) shows that the bears are firmly in control, with the negative directional indicator (DI-) above the positive (DI+). Immediate resistance is expected near the Rs 98-100 level, and the bearish trend is likely to continue until prices rise above this range.

Given the deteriorating technical picture across insurance stocks, Shah advises investors to be cautious. Jumping into these stocks prematurely may not be wise. It is better to wait for clearer signs of stabilization and any upcoming regulatory developments before taking new positions.

Options Market and Trading Range

In the options market, significant call writing has appeared at the 23,300 and 23,400 strikes, with call open interest nearly double and triple that of puts, respectively. These levels are expected to act as immediate resistance. On the downside, the 23,000 put strike shows strong open interest, about four times greater than calls, suggesting solid support near this level.

With the monthly expiry coming up on Tuesday, the likely trading range for Nifty is between 23,000 and 23,400. The 23,000 level will serve as key support while 23,400 is the main resistance to watch.

Sector Strength and Stock Picks

Pharma and healthcare sectors continue to display relative strength amid ongoing market volatility. Shah identified five stocks with promising technical setups for the coming week: Jubilant Pharma (JUBLPHARMA), Privi Speciality Chemicals (PRIVISCL), Zydus Lifesciences (ZYDUSLIFE), HBL Power Systems (HBLENGINE), and Aether Industries (AETHER).

These stocks could outperform if market conditions stabilize, but investors should consider their own research and risk tolerance before making decisions.

Disclaimer: The views expressed here are those of the analyst and do not represent recommendations from The Economic Times Digital. Readers should use this information as part of their comprehensive investment evaluation.