Trade Setup for January 22: Lack of buyers limits rally potential
Nifty holds the key 25,000 level but weak buying, Bank Nifty pressure, and cautious earnings sentiment signal continued volatility in the January 22 trade setup.
Trade Setup for January 22: Nifty holds 25,000 support, but rebound remains fragile
The Nifty managed to defend the crucial 25,000 level after sharp intraday volatility, but weak buying conviction, pressure on Bank Nifty, and cautious earnings sentiment suggest markets may remain vulnerable in the near term.
The Indian equity market continues to walk a tightrope as volatility dominates price action. On Wednesday, the Nifty showcased dramatic intraday swings, briefly slipping below key levels before staging a modest recovery. However, the rebound lacked strength, reinforcing the market’s fragile undertone.
The benchmark index moved sharply from 25,141 to an intraday low of 24,919, rebounded towards 25,300, and eventually settled near 25,150. Despite recovering nearly 250 points from the day’s low, the Nifty failed to hold higher levels, indicating persistent selling pressure at every rise. The index also ended the session close to where it started, underlining the lack of directional conviction.
200-DMA No Longer a Safe Haven
One of the key takeaways from Wednesday’s trade is the weakening influence of technical supports. The 200-Day Moving Average (DMA), traditionally viewed as a strong line of defense, appears vulnerable in the current environment. Although the Nifty managed to protect it for now, market participants remain cautious.
Going forward, 25,000 emerges as the most critical support zone. A decisive break below this psychological level could open the gates for a deeper correction, potentially dragging the index towards the September 30 swing low of 24,587, from where the previous rally toward record highs had begun.
Earnings Sentiment Adds to Market Pressure
Market sentiment remains fragile, with even decent earnings failing to impress investors. The Street has been quick to punish stocks that do not exceed expectations, reflecting heightened risk aversion.
Thursday’s session is expected to be particularly active on the earnings front. Stocks such as Eternal, Dr. Reddy’s Laboratories, Canara HSBC Life, EPack PreFab, HPCL, KEI Industries, and UTI AMC are likely to react to their results. Additionally, companies including Aditya Birla Sun Life AMC, Coforge, Cyient, DLF, Indian Bank, Premier Energies, Zee Entertainment, V-Mart Retail, and Zensar Technologies are scheduled to announce earnings, which could drive stock-specific volatility.
Expert Views: Caution Still Advised
Market experts continue to advise caution.
Rajesh Bhosale of Angel One noted that the Nifty has formed a “spinning bottom” pattern on charts, signaling indecision. He believes the upside remains capped, and in the absence of a clear bullish reversal, further downside cannot be ruled out. According to him, the 50-week Exponential Moving Average (WEMA) around 24,900–24,800 could act as immediate support, while 25,300 remains a strong resistance.
Echoing similar concerns, Nagaraj Shetti of HDFC Securities said the broader trend remains weak, with the Nifty struggling to sustain above 25,150. He warned that a breakdown below 24,900 could pull the index towards 24,500 in the near term. On the upside, a sustained move above 25,200 may provide some relief.
Bank Nifty Loses Its Shield Status
For much of the past two weeks, Bank Nifty had cushioned the downside for the broader market. That support has now cracked. After touching the 60,000 mark last week, the index has witnessed a sharp decline, dragging the Nifty lower.
As of Wednesday’s close, Bank Nifty is nearly 1,600 points below its record high of 60,437. It has slipped decisively below key support levels of 59,500 and 59,000, raising concerns about further weakness.
Vatsal Bhuva of LKP Securities highlighted that the index has fallen below its 50-day Simple Moving Average (SMA), indicating increasing bearish control. While holding above 59,700 offers some temporary relief, he suggests adopting a bullish stance only if Bank Nifty manages a sustained close above 59,800. Until then, volatility with a bearish bias may persist.
Outlook for January 22
As markets head into Thursday’s session, traders should brace for heightened volatility driven by earnings reactions and fragile technical setups. While the Nifty has managed to defend the crucial 25,000 level, the lack of strong buying interest suggests that rallies may continue to face resistance. A cautious, stock-specific approach may be prudent until clearer directional cues emerge.
