Indian equity benchmarks staged a rebound on Wednesday, recovering part of the previous session's losses as value buying emerged in select large-cap stocks. However, the recovery lacked broad-based participation, keeping the near-term market setup cautious.
The Nifty has declined more than 1,650 points from its August high of 24,772, with the sharp correction pushing short-term momentum indicators into oversold territory.
“Technically, Nifty found support near the previous day's low and formed a Harami candlestick pattern on the daily chart. This formation may pave the way for a short-term pullback within the broader downtrend,” said Vinay Rajani, Senior Technical Research Analyst at HDFC Securities.
Rajani noted that the index's decline from the August high has pushed short-term oscillators into oversold territory, raising the possibility of a recovery.
“Nifty may rebound towards the 23,500-resistance zone, provided it holds above the recent swing low near 23,100. However, a break below 23,100 could drag Nifty towards positional support of 22,700,” he said.
Despite Wednesday's recovery, momentum indicators continue to point to strong selling pressure.
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“Momentum remains weak, with the RSI at 22.67, firmly in oversold territory and below its signal line, indicating strong selling pressure. However, the deeply oversold reading leaves room for a short-term technical rebound,” said Ponmudi R, CEO of Enrich Money.
Bank Nifty Outlook
Bank Nifty also witnessed buying interest at lower levels following the sharp decline in the previous session.
“The banking benchmark index formed an inside candle following the sharp decline in the previous session and witnessed buying traction at lower levels. Bank Nifty closed 0.89% higher, indicating some recovery interest; however, sustained follow-up buying will be required to extend the pullback,” said Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities.
He said failure to sustain the recovery could keep the prevailing bearish bias intact.
“Going forward, the 55,800–55,700 zone could act as a crucial support area. A sustained breach below 55,700 could drag the index towards 55,200 levels,” Shah said.
On the upside, 56,800 is likely to act as an immediate hurdle. A sustained move above 56,800 could extend the pullback towards 57,200 levels, he added.
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