Indian Markets Poised for Rebound: Key Levels to Watch as Nifty and Sensex Eye July Rally

After a fleeting pause for profit-taking, India's benchmark stock indices, the Nifty and Sensex, appear ready to kick off July with renewed vigor. The optimistic sentiment follows record highs on Wall Street, further bolstered by Canada's decision to scrap its digital tax, a move aimed at smoothing trade relations with the United States. Early indicators are positive, with Gift Nifty trading up 0.2 percent at 25,627 around 7:30 am IST.

The previous trading session saw a halt to Dalal Street's impressive four-day winning streak as investors opted to lock in some gains. Interestingly, while the front-line indices saw some muted sentiment, the broader markets defied the trend, each gaining approximately 50 basis points.

Provisional data reveals a familiar pattern in institutional activity: Foreign Institutional Investors (FIIs) were net sellers on June 30, offloading shares worth Rs 832 crore. However, their selling was comfortably absorbed by Domestic Institutional Investors (DIIs), who emerged as net buyers, injecting Rs 3,497 crore into the market.

Navigating the Markets: Crucial Levels for Today's Session

Investors will be closely watching several key levels to gauge the market's direction throughout the day.

For the Nifty, a sustained breach above the 25,750 mark could reignite bullish momentum, potentially propelling the index towards the significant psychological barrier of 26,000. Conversely, any pullbacks towards the 25,300–25,400 support zone are expected to be orderly and could present fresh buying opportunities, setting the stage for the next leg of the rally. The overall chart structure remains robust, advocating a 'buy-on-dips' strategy as long as these crucial support levels hold firm.

Echoing this sentiment for the banking sector, Dhupesh Dhameja of SAMCO Securities noted, "A decisive breakout above the 57,600 mark for the Bank Nifty could accelerate the rally, opening the path towards the psychological 58,300 level. Meanwhile, dips towards 57,000 should be viewed as healthy corrections that offer accumulation opportunities. The current technical setup continues to favor a 'buy-on-dips' strategy as long as key support thresholds are respected."

The India VIX, often referred to as the "fear gauge," edged higher by 3.21 percent, closing at 12.78. Despite this minor uptick, it continues to hover comfortably below the psychological mark of 15. This indicates a stable and low-volatility environment, suggesting that investor confidence remains strong and market fear is subdued – a generally supportive backdrop for a sustained upward move.

However, a closer look at the derivatives market shows an interesting shift. The Put-Call Ratio (PCR) has seen a sharp drop from 1.18 to 0.64. This decline reflects aggressive call writing activity, hinting at firm resistance at higher price points. "Meanwhile, the Max Pain point has shifted to 25,500," Dhemeja added, "implying this level could act as a gravitational pull heading into the weekly expiry."

As the market opens for July, all eyes will be on these critical levels and institutional flows to determine the trajectory of the Indian benchmarks.