The Nifty 50 began Monday's session on a weak note and slipped below the key psychological mark of 24,000 during the day, forming a lower low in the process. However, buying interest emerged at lower levels, helping the index recover more than 85 points from the day's low. It eventually settled at 24,080.40, down 95.25 points or 0.39%, almost in line with its August 19 closing level.
Monday also marked the final trading session of August. The Nifty ended the month with a loss of 1.24%, snapping its two-month winning streak after posting gains in both June and July.
One of the notable features of the session was the sharp movement during the Closing Auction Session (CAS). Bank Nifty witnessed a movement of more than 600 points, while the Nifty Midcap 100 saw a swing of around 550 points. Such unusually large moves during the closing auction are creating confusion among traders and raising questions about price stability during the closing process.
Hammer Candle Keeps Reversal Hopes Alive
Despite the weak close, the recovery from the day's low helped the Nifty form a hammer candle on the daily chart. Monday's low of 23,993 now becomes an important support level.
That said, technical setup remains cautious. The index continues to trade below both its 20 DMA and 50 DMA, while the 20 DMA has started turning lower.
For the hammer candle to gain significance, the Nifty needs to close above Monday's high of 24,129. Such a move would confirm the bullish implication of the pattern and improve the possibility of a recovery towards the 50 DMA, currently placed near 24,210. Beyond this, the 24,370 to 24,400 zone remains an important resistance area.
On the downside, a decisive close below 24,000 would weaken the setup and could open the door for a test of the July 27 gap zone between 23,892 and 23,824.
GDP Data and Auto Sales Take Centre Stage
The market will now respond to India's GDP numbers, which were released after market hours on Monday and came in above expectations. The stronger than expected growth print could provide some support to sentiment as September trading begins.
Auto stocks will also remain in focus as companies start announcing their August sales numbers. These data points could influence sector specific activity during the opening sessions of the new month.
September Seasonality Offers Some Encouragement
Historical trends provide another reason for bulls to remain hopeful. In four of the last five years, the Nifty has ended September in positive territory. The exception was 2022, when the index declined 3.74% during the month.
Looking at a longer period beginning in 2009, the Nifty has recorded an average September gain of around 1.76%. While seasonality alone cannot determine the market direction, the combination of stronger GDP growth and September's relatively favourable historical record could help keep recovery hopes alive.
For now, price confirmation remains important. A sustained move above the hammer candle high of 24,129 would strengthen the case for a near term rebound, while a decisive break below 24,000 would shift attention back towards the July 27 gap area.
Stock to Watch: Engineers India
Engineers India has registered a decisive breakout from a nearly four-month consolidation, which had taken the shape of a triangular pattern. The breakout indicates a resumption of the broader uptrend and opens up a fresh entry opportunity.
Importantly, the move has been backed by strong volumes, with trading volume rising to nearly three times the 30-day average. This reflects increased participation and adds strength to the breakout.
The stock is also trading above all its key moving averages, including the 20, 50, 100 and 200 DMA, keeping the overall technical structure positive.
As long as the stock sustains above the Rs 264 to Rs 265 zone, the outlook remains favourable. On the upside, it can move towards Rs 280 to Rs 288 over the short to medium term. A stop loss can be maintained at Rs 244.
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