Navigating the Volatile Waters: Nifty and Bank Nifty at a Crossroads Amid Geopolitical Tensions

The Indian equity markets find themselves at a crucial juncture, with both the Nifty 50 and Bank Nifty exhibiting range-bound behavior as global uncertainties, particularly the simmering Iran-Israel conflict, cast a long shadow. Investors and traders are keenly watching key support and resistance levels, attempting to decipher the market's next significant move.

For the past three trading sessions, the benchmark Nifty 50 has been confined to a tight band between 24,700 and 25,000. Interestingly, this period of consolidation has coincided with a decline in India's volatility index, VIX, which has comfortably settled below the 15 mark. This usually signals a more sanguine outlook for the bulls, yet the underlying geopolitical concerns seem to be holding back any decisive upward momentum.

Market experts suggest that a failure by the Nifty 50 to hold its ground above the 24,700 closing level could see it retreat towards the 24,500-24,450 zone, a critical support area. Conversely, a sustained breakthrough and close above the psychological 25,000 mark could pave the way for a rally, potentially targeting 25,200-25,300.

Meanwhile, the banking sector index, Bank Nifty, is also grappling with its own set of challenges. It needs to decisively reclaim and sustain above 56,000 to initiate a climb towards 56,200-56,500. Immediate support for the Bank Nifty is anticipated around the 55,400-55,500 levels.

Looking back at the recent session on June 18th, the Nifty 50 experienced a slight dip, closing 41 points lower at 24,812. In contrast, the Bank Nifty showed some resilience, gaining 115 points to end the day at 55,829. However, the overall market breadth leaned towards the bears, with approximately 1,689 shares declining on the NSE against 894 advancing ones.

Expert Insights and Strategies:

Sudeep Shah, Deputy Vice President and Head of Technical and Derivative Research at SBI Securities, highlights the Nifty's prolonged consolidation, noting its confinement within the 25,222 to 24,462 range over the last 26 trading sessions. He points out the frequent gap-up or gap-down openings, indicative of heightened intraday volatility despite the overall sideways movement. From a technical perspective, key indicators like short and medium-term moving averages have seen their upward slope flatten, suggesting a loss of momentum. The daily RSI is also mirroring this sideways trajectory, while the ADX (Average Directional Index) sits at a near-July 2024 low of 14, reinforcing the lack of strong directional bias.

Shah further observes a significant contraction in the Bollinger Bands on the daily chart, a phenomenon known as a "Bollinger Band Squeeze." This often precedes a sharp breakout or breakdown, urging traders to remain vigilant for a decisive price expansion outside the current range. He pinpoints 24,680–24,650 as immediate support for the Nifty, with 24,500 as the next crucial level if it slips lower. On the upside, 24,900–24,940 serves as an immediate hurdle.

Sudeep Shah's Strategy for Nifty: Buy Nifty Futures between 24,770–24,830, with a stop-loss of 24,700, targeting 24,980–25,030.

For the Bank Nifty, Shah notes its recent rebound from the 34-day EMA, though it has since been oscillating around its 20-day EMA, signaling market indecision. The daily RSI's sideways movement further suggests a consolidation phase awaiting a definitive breakout. He identifies 55,450–55,400 as immediate support, with 55,000 as the subsequent crucial level. Resistance is seen at 56,000–56,100.

Sudeep Shah's Strategy for Bank Nifty: Buy Bank Nifty Futures between 55,800–55,900, with a stop-loss of 55,500, targeting 56,350–56,500.

Jatin Gedia, Technical Research Analyst, Capital Market Strategy at Mirae Asset Sharekhan, reiterates the Nifty's broad 24,700–25,000 range. He highlights a failed attempt to breach 24,950–25,000, while the 24,750–24,700 zone has proven to be a strong support, attracting buying interest on dips. Gedia anticipates the index to hold this support and resume its upward trajectory towards 25,000–25,100, suggesting that stock-specific action might dominate during this consolidation.

Jatin Gedia's Strategy for Nifty: Buy Nifty Futures with a stop-loss of 24,680, targeting 24,965.

Regarding Bank Nifty, Gedia observes its relative outperformance and positive close. He points to bullish developments in key constituent banks like HDFC Bank, Kotak Mahindra Bank, IndusInd Bank, and AU Small Finance Bank, expecting continued positive momentum. He identifies 55,500–55,400 as a crucial support zone, with 56,400–56,500 as the immediate hurdle, maintaining a positive bias for the Bank Nifty.

Jatin Gedia's Strategy for Bank Nifty: Buy Bank Nifty Futures with a stop-loss of 55,500, targeting 56,400.

Rupak De, Senior Technical Analyst at LKP Securities, attributes the Nifty 50's recent heightened volatility to the ongoing Israel-Iran conflict and concerns of potential US military involvement, dampening global sentiment. He notes the Nifty's slip below the 24,850 support. A decisive move back above 24,850 could trigger a rally towards 25,000/25,350, while continued weakness below this level might push the index down to 24,500.

Rupak De's Strategy for Nifty: Buy Nifty 24,700 Put above Rs 62, with a stop-loss of Rs 28, targeting Rs 130 for June 19 expiry.

For Bank Nifty, De highlights the bullish candlestick formation on Wednesday, yet cautions that the index remains around its flattening 20-day EMA, indicating a lack of clear direction. While there's some buying interest, the RSI suggests underlying weakness. Support for Bank Nifty is seen near 55,400, with resistance at 56,200. A decisive move beyond 56,200 could lead to a rally towards 57,000.

Rupak De's Strategy for Bank Nifty: Buy Bank Nifty June Futures above 56,000, with a stop-loss of 55,734, targeting 56,400.

Conclusion:

The Indian markets are caught in a delicate balance, swayed by global geopolitical currents and domestic technical indicators. While the receding VIX suggests some comfort for the bulls, the prolonged consolidation and the looming threat of escalation in the Middle East demand cautious navigation. Traders are advised to closely monitor the identified support and resistance levels, and to align their strategies with confirmed breakouts or breakdowns, keeping risk management at the forefront.