The Indian equity market remained cautious ahead of the highly anticipated Union Budget, with the Nifty 50 index trading in a narrow range and closing marginally lower. Despite the lack of strong directional momentum, the index displayed notable resilience by holding firmly above its 200-day moving average (200-DMA)—a key long-term technical support. This price behaviour suggests that while sentiment remains cautious, the broader market structure is gradually improving.
As volatility stays elevated and traders position themselves ahead of the budget announcement, the formation of a strong base near critical support levels is strengthening the buy-on-dips strategy in the near term.
Market Recap: Nifty Defends Key Long-Term Support
The Nifty spent the session oscillating within the previous day’s range, reflecting indecision among market participants. The index faced mild pressure in the first half after a gap-down opening but found strong buying interest near the 24,900–25,000 zone, an area that aligns with the 200-DMA.
This support zone has emerged as a crucial demand pocket, acting as the bulls’ final line of defence. The index's ability to absorb selling pressure at these levels indicates institutional accumulation rather than panic-driven liquidation.
The Nifty eventually closed at 25,320.65, down 98.25 points, reinforcing the view that the market is consolidating rather than breaking down.
Technical Analysis: Base Formation Signals Stability
From a technical perspective, the price structure is showing early signs of stabilisation:
- The index is holding above the 200-DMA, preserving the broader bullish trend.
- Higher lows on the intraday charts point to gradual accumulation at lower levels.
- The 20-day EMA, currently sloping downward near 25,500, is acting as a near-term resistance and represents a key inflection point.
The Relative Strength Index (RSI) has improved and is holding above the 40 mark, suggesting that bearish momentum is gradually weakening. While the RSI is not yet in a strong bullish zone, it reflects easing selling pressure and improving price behaviour.
A decisive breakout above 25,500 could trigger short covering and attract fresh buying interest, potentially leading to a sharper recovery.
Key Support and Resistance Levels
Support Levels
- 25,000–24,900: Major base zone aligned with the 200-DMA
- 25,200–25,100: Immediate short-term support
Resistance Levels
- 25,500: Critical resistance and trend-defining level
- 25,550–25,600: Next upside hurdle if breakout occurs
As long as the Nifty sustains above the 25,100–25,000 region, the broader structure remains intact.
Derivatives Analysis: Cautious but Improving Undertone
The derivatives data reflects a range-bound but stabilising market environment:
- Call writers have added aggressive positions at and around the 25,500 strike, reinforcing it as a strong resistance zone.
- Put writers have started building positions near the 25,000 strike, highlighting confidence in downside support.
Key Open Interest Data:
- 25,500 Call OI: ~72.55 lakh contracts (strong resistance)
- 25,000 Put OI: ~71.74 lakh contracts (strong support)
The Put–Call Ratio (PCR) has declined to 0.76, indicating cautious sentiment and near-term consolidation. However, the steady build-up of put positions suggests that downside risks remain limited unless key supports are breached.
India VIX and Budget Volatility
The India VIX remains elevated ahead of the Union Budget, signalling expectations of sharp intraday swings. Historically, markets tend to stay range-bound before the budget and witness increased volatility post-announcement as policy clarity emerges.
Traders should therefore expect short-term volatility spikes, while investors may continue to focus on structural support levels and macro cues.
Market Outlook: Buy-on-Dips Strategy Remains Relevant
The Nifty’s ability to defend the 200-DMA and build a base near 25,000 is a constructive development amid ongoing uncertainty. While the index is yet to reclaim key short-term moving averages, the broader trend remains intact.
Outlook Summary:
- Holding above 25,000 keeps the bullish bias alive
- Breakout above 25,500 may trigger short covering
- Dips toward 25,200–25,100 likely to attract buying interest
Until a decisive move emerges, the market is expected to remain range-bound with a positive bias, making a buy-on-dips approach the preferred strategy for the near term.
Final Takeaway
Despite pre-budget caution and elevated volatility, Nifty’s strong defence of the 200-DMA signals resilience and improving stability. The evolving base formation suggests that downside risks are being contained, and any positive trigger—especially from budget announcements—could act as a catalyst for a renewed upside move.
Investors and traders should remain selective, disciplined, and focused on key technical levels while navigating the evolving market landscape.
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