Indian Markets Brace for Cautious Start Amid Global Trade Tensions

The Indian stock market's benchmark indices, the Sensex and Nifty 50, are poised for a subdued opening on Monday, July 7, as global markets react to lingering uncertainties surrounding US President Donald Trump's tariff policies. The Gift Nifty, a key indicator for Indian markets, also points to a flat start, trading at a slight discount to Nifty futures' previous close.

This comes after a brief respite on Friday, where the domestic equity market broke a two-day losing streak to close higher. The Sensex gained 193.42 points (0.23%) to finish at 83,432.89, while the Nifty 50 advanced 55.70 points (0.22%) to settle at 25,461.00. However, the week saw both benchmarks lose around 0.7% amid valuation concerns and caution ahead of the crucial India-US trade deal deadline on July 9.

Sensex: Navigating Resistance and Support

Technical analysts suggest a mixed picture for the Sensex. While the short-term market texture appears positive, the index is showing a lower top formation on intraday charts and a bearish candle on weekly charts, indicating potential negativity.

Amol Athawale, VP-Technical Research at Kotak Securities, believes the market is currently in a "non-directional activity," possibly awaiting a decisive breakout. For bullish traders, 83,600 is the immediate resistance. A sustained move above this level could push the Sensex towards 84,100, with a potential extension to 85,000 - 85,300. Conversely, a fall below 83,000 could turn sentiment negative, leading the index down to 82,100 - 81,900.

Nifty 50: Holding Key Supports and Eyeing Upside

The Nifty 50 displayed resilience on Friday, bouncing back from its swing lows and forming a small positive candle with a long lower shadow. This suggests emerging buying interest around the crucial 25,300 support level.

Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, notes that the bullish pattern of higher tops and bottoms remains intact. The current weakness could be part of a new higher bottom formation, which needs further confirmation with an upside move. On the weekly chart, Nifty formed a negative candle after an excellent breakout in the prior week, suggesting it's at a crucial support level. Shetti identifies 25,700 as the next upside target for the coming week, and 26,200 for the next two weeks, with immediate support at 25,300.

Puneet Singhania, Director at Master Trust Group, echoes the sentiment, highlighting the 25,250 – 25,300 zone as strong support despite Nifty forming a negative weekly candle. The index remains above its 21-day and 55-day Exponential Moving Averages (EMAs), and the Relative Strength Index (RSI) at 61 signals underlying strength. Singhania advises positional traders to "buy on dips" near support, while cautioning that a breach below 25,250 could lead to further downside towards the psychological 25,000 mark. Immediate resistance is at 25,700, with a decisive breakout potentially triggering a rally towards 26,000.

VLA Ambala, Co-Founder of Stock Market Today, observes a "bearish hammer" candlestick pattern on the weekly chart for Nifty 50, but views this as a "healthy pullback" within an ongoing uptrend. She anticipates Nifty 50 to find support between 25,400 and 25,320, and face resistance near 25,570 and 25,650 in the upcoming session.

Bank Nifty: Consolidating After a Strong Run

The Bank Nifty index gained 239.95 points (0.42%) on Friday, closing at 57,031.90. While it formed a small bear candle with a higher high and higher low on the weekly chart, this indicates a period of consolidation after its recent strong upward movement.

Bajaj Broking Research identifies a key support zone for Bank Nifty between 56,000 – 55,500, a confluence of technical indicators including the 50-day EMA and the 61.8% Fibonacci retracement. They anticipate the index to consolidate within the 56,000 - 57,500 range in the coming sessions. A break above 57,500 could open the path towards 58,500.

Puneet Singhania reinforces the bullish overall chart structure for Bank Nifty, with the index sustaining above its 21-day and 55-day EMAs. Key support lies at 56,500. While a breach could lead to profit booking towards 56,000, the broader trend remains strong, suggesting a "buy-on-dips" strategy. Immediate resistance is at 57,600, with a breakout potentially triggering a rally towards 58,000. Traders are advised to monitor price action around support zones for entry opportunities.

Key Factors to Watch Today:

US Tariff Deadline (July 9): Uncertainty over US President Donald Trump's potential tariffs and the ongoing India-US trade deal negotiations remain a significant overhang. Reports suggest a possible interim trade deal could be announced before the deadline, which would be a positive trigger.

Global Market Cues: Weakness in Asian markets and US stock futures due to tariff concerns will influence sentiment.

Q1 Earnings Season: The start of the Q1 corporate earnings season will bring stock-specific action, with IT major TCS and retail giant Avenue Supermarts among the prominent companies scheduled to report their quarterly results.

DII and FII Activity: Domestic Institutional Investors (DIIs) continue to provide partial support, while Foreign Institutional Investors (FIIs) have been net sellers, reflecting a cautious approach.

Investors should prepare for continued volatility and focus on a stock-specific approach, emphasizing earnings quality and relative strength as the earnings season progresses.