Ahead Dalal Street Week: Will Nifty hold 23,000 as market tests key support?

Markets traded with a negative bias during the week and ended lower after being under constant pressure. The Nifty oscillated in a 582-point range, marking a high of 23,733.70 and a low of 23,151.50 before settling near the lower end of this band. Volatility remained subdued despite a corrective undertone, with the India VIX falling 2.47% to 15.79 during the week. As a result, the Nifty ended the week down 181.05 points (-0.77%).

The broader technical framework continues to be at a critical tipping point. Nifty is currently trading below its 50-week and 100-week moving averages, while trying to stabilize above the critical support area near 23,000-23,100. This zone has emerged as a key line of defense for markets, and options data also suggests that participants are likely to actively hedge this area.

While immediate losses appear to be cushioned by the 23,000-23,100 zone, any meaningful and sustained breach of this support area will cause structural damage to the market and could trigger a new phase of weakness. On the upside, the index should reclaim and sustain above the 23,600-23,800 zone to improve the near-term outlook and pave the way for some recovery.

Next week is likely to get off to a cautious start as markets continue to assess the strength of support near the lower end of the existing trading range. Immediate resistance levels are placed at 23,643 and 23,800, which are in line with the previous 20-week moving average. Support comes at 23,000 and 22,800, with the 23,000-23,100 zone being the most important area to monitor.

The weekly RSI remains at 39.25 and remains below the neutral 50 mark, indicating a weak momentum setup. RSI shows no meaningful bullish or bearish deviation relative to price and remains neutral. The weekly MACD remains below its signal line and continues to remain in negative territory.

A study of the pattern structure shows that the Nifty continues to trade in a broad sideways path that has controlled the price action for the past few quarters. The recent decline has brought the index closer to the lower boundary of this formation, making the current levels technically important. The longer-term trend remains intact as long as the channel holds support, while the index remains below its 50-week moving average of 24,901 and 100-week moving average of 24,526, keeping the medium-term trend under pressure. The 200-week moving average at 22,087 continues to provide strong long-term support and reinforces the importance of a broader uptrend.

Given the current setup, traders should refrain from taking an overly aggressive stance until the index decisively reclaims the overhead resistance level or confirms a support-forward from the 23,000-23,100 zone. While this support area may continue to attract buying interest, the risk-reward equation does not yet favor indiscriminate accumulation. Fresh purchases should be highly selective and stock-specific, with greater emphasis on relative strength and risk management. Preservation of capital should remain a priority, especially if the index shows any sustained weakness below 23,000.

In our look at Relative Rotation Graphs®, we compared various sectors against the CNX500 (NIFTY 500 Index), which represents more than 95% of the free-float market cap of all listed stocks.

The Relative Rotation Graph (RRG) shows that only Nifty MIDCAP100, Energy, Media and Metal indices are within the leading quartile. These groups are likely to outperform the broader Nifty 500 index relatively.

Nifty Pharma, PSE and Infrastructure Index are in the weak quartile. They are likely to slow down their relative performance, while isolated stock-specific performance cannot be ruled out.

Nifty PSU Bank Index, Services Sector Index, IT, Financial Services and Nifty Bank Index are seen in the lagging quadrant. These groups may be relatively underrepresented in broader markets. Nifty Auto Index is also within the lagging quadrant; However, it is seen to improve its relative speed.

While the realty and FMCG indices remain in the improving quadrant, the FMCG index is seen giving up its relative momentum.

Important Note: The RRGTM chart shows the relative strength and momentum of a group of stocks. In the above charts, they show relative performance against the NIFTY500 index (broader markets) and should not be used directly as buy or sell signals.