The Nifty 50 and Bank Nifty recovered all their Friday losses and formed bullish hammer-like candlestick and green candle patterns, respectively, on the daily charts on January 20, which is a positive sign. However, the overall sentiment remains bearish, given that the MACD is in sell mode and the 50-day SMA has fallen below the 200-day SMA. If the index climbs and sustains above 23,400 (a key resistance level), a rally towards 23,600 can’t be ruled out. Until then, consolidation may be seen, with support at 23,100. The Bank Nifty is likely to march towards the 50,000 mark, provided it defends 49,000, but a breakdown below 49,000 could open doors for 48,500, according to experts.

On Monday, January 20, the Nifty 50 rebounded by 142 points to 23,345, while the Bank Nifty rallied 810 points (1.67%) to 49,351, with a positive market breadth. About 1,662 shares saw buying interest, compared to 925 shares that were corrected on the NSE.

Nifty Outlook and Strategy

Jay Thakkar, Vice President & Head of Derivatives and Quant Research at ICICI Securities

The Nifty has been consolidating within a sideways, upward-sloping parallel channel after breaking its previous swing low at 23,263 levels. The index has taken strong support at the 23,000 level, mainly due to the oversold conditions in the index and broader markets. Global markets have bounced back sharply, which has allowed our domestic markets to hold on to the 23,000 level in the January series so far. On the upside, 23,600 is an immediate resistance, and that level can be tested in this short-covering move.

The momentum indicator, MACD (Moving Average Convergence Divergence), is in sell mode on the daily, weekly, and monthly charts, indicating that momentum is still in favor of the bears. The 50-day moving average has crossed the 200-day moving average from the top, which is called a "Death Crossover" and is a bearish signal. Technically, 23,100 and 23,000 are good support levels in the near term, whereas 23,600, 23,800, and 24,000 levels are resistances in the short term.

From the derivatives perspective, the options data indicates that the bulls now have the upper hand, as the PCR (Put-Call ratio) has moved back above 1 at 1.02, after a long time. There have been good Put additions from the 23,000 strike to the 23,300 strikes, and there has not been much aggressive Call writing at higher levels, apart from the 24,000 level, which has the highest open interest of more than 91 lahks. The India VIX, as anticipated, has been inching higher and is likely to test the 18 to 20 levels until the budget time. Hence, markets are likely to remain volatile going ahead. In the near term, the markets are likely to be sideways and trade within a range of 23,600 to 23,000. Whichever side it breaks this range will further establish the next move.

Key Resistance: 23,600

Key Support: 23,100, 23,000

Strategy: Buy Nifty Futures with a stop-loss of 23,100, targeting 23,600.

Jigar S Patel, Senior Manager - Equity Research at Anand Rathi

On the 4-hour chart, a bull divergence was seen, which hints at bullish momentum in the coming sessions. The FII long-short ratio, at just 16 percent (as of January 17), highlights oversold conditions, further supporting the likelihood of a rebound. Immediate resistance stands at 23,400, while key support lies at 23,200. These levels will be critical in determining the next move, presenting a promising setup for a short-term recovery.

Key Resistance: 23,600

Key Support: 23,000, 22,800

Strategy: Buy Nifty Futures near 23,350, with a stop-loss of 23,100, targeting 23,800.

Anshul Jain, Head of Research at Lakshmishree Investments

The Nifty concluded the day with a bullish hammer on the daily charts, signaling a potential upside, especially after rejecting the key weekly swing low of 23,265, which now acts as strong support for the near term. Notably, heavy Put writing was observed throughout the session, indicating a shift in market sentiment towards the bulls. A decisive move above the previous week's high of 23,392 could trigger short-covering, pushing the index toward initial targets of 23,500, and potentially 23,750 if momentum continues. With solid support at 23,265, traders should watch for breakout confirmation for further upside potential.

Key Resistance: 23,392, 23,500

Key Support: 23,275, 23,200

Strategy: Buy Nifty Futures above 23,392, with confirmation of strong momentum. Place a stop-loss below 23,265.

Bank Nifty - Outlook and Positioning

Jay Thakkar, Vice President & Head of Derivatives and Quant Research at ICICI Securities

The Bank Nifty has so far bounced back quite well from approximately 48,000 to 49,650 levels, and in this process, it has retested the levels from which it had provided the breakdown. Now, on the upside, 50,000 is an immediate resistance, whereas 48,500 is an immediate support. The range for the index is 1,500 points, and whichever side it provides a further breakout, will establish the next move.

The MACD is well into the sell mode on the weekly as well as monthly charts. However, it appears to be reversing from an oversold territory on the daily charts, hence there is a high probability of further short-covering in it. From the derivatives front, there have been significant Put additions right from the 48,000 strike to the 49,500 strike, and unwinding of Calls from the 48,500 strike to the 51,000 strike. The PCR is still near the oversold territory (at 0.63), so there is still much room for short-covering. The maximum pain is at the 50,000 level, so above that, more short-covering is expected in the near term.

Key Resistance: 50,000

Key Support: 48,500

Strategy: Buy Bank Nifty Futures on dips near 49,000, with a stop-loss of 48,500, targeting 50,000 and 51,000.

Jigar S Patel, Senior Manager - Equity Research at Anand Rathi

Last week, the Bank Nifty found support near 48,000, aligning with the breakout zone from May 2024, signaling a strong base. In the previous session, it surged nearly 800 points in a single day, suggesting bullish momentum may continue toward the 50,300 level. On the daily chart, the RSI (Relative Strength Index) has formed an impulsive structure, further reinforcing the likelihood of an upward move in the coming sessions. This confluence of support at a key level, strong price action, and momentum indicators highlights a favorable bullish setup, with traders likely positioning for further upside in Bank Nifty.

Key Resistance: 50,000

Key Support: 48,700

Strategy: Buy Bank Nifty Futures in the zone of 49,250-49,300, with a stop-loss of 48,700, targeting 50,500.

Anshul Jain, Head of Research at Lakshmishree Investments

The Bank Nifty showed resilience as it opened above Friday’s midpoint and closed above the previous day’s high, forming a modified kicker pattern—a clear sign of bullish intent. For this rally to sustain and trigger short-covering, the index must hold above 49,475. If achieved, it could propel the index toward the 50,200 mark, supported by momentum from short-covering. On the downside, immediate support is placed at 49,050. This setup highlights strong bullish sentiment, setting the stage for a potential breakout if key levels are maintained.

Key Resistance: 49,350, 49,475

Key Support: 49,250, 49,050

Strategy: Buy Bank Nifty above 49,350, with confirmation of strong momentum. Set a stop-loss below 49,050 for risk management. The first target is 49,475, followed by 50,200 as a potential resistance level.