Trade Setup for February 25: 22,800 breaks, 22,500 becomes key support level
Trade Setup for February 25
Foreign investors remained heavy sellers in the cash market on Monday, with sell figures nearing a billion dollars. Domestic institutions continued to absorb the selling pressure, but they were outpaced on the day.
A trend has a shelf life, and over the past 10-12 trading sessions, the buzzword for the Nifty was 22,800. The bulls did everything they could to defend this level for nearly two weeks. However, like all trends, the streak ended on Monday.
Market Overview
A significant sell-off in Wall Street on Friday set the stage for a gap-down opening in the Nifty on Monday, even though Asian markets had recovered, and US futures were in the green from lower levels. However, the Indian markets showed no such exception, with Dalal Street closing at one of the lowest points of the session, making it another difficult day for the bulls.
The key change in sentiment over the past few days, especially after Monday's session, is the shift in levels. Previously, bulls were fiercely defending the 22,800 mark, but now that this level has been decisively breached, the focus has shifted to the 22,500 support level on the downside.
Key Global and Local Triggers
The upcoming week will be a shortened one for Indian equities, with several global and local factors in play. Concerns over tariff uncertainties linked to Donald Trump persist, while the possibility of outflows from India and inflows into outperforming Chinese and Hong Kong markets remain. Additionally, results from Nvidia and the release of the Personal Consumption Expenditure (PCE) data on Friday will be key market events.
Despite the recent sell-off, some brokerages are taking a more optimistic view on Indian equities. Jefferies believes a short-term bounce could be on the horizon, with valuations nearing long-term averages after the decline. Citigroup has also turned overweight on Indian markets, with a target of 26,000 for the Nifty.
Foreign Selling and Domestic Buying
Foreign investors continued their aggressive selling in the cash market, with net sales nearing a billion dollars. Meanwhile, domestic institutions attempted to absorb the selling pressure but were outmatched by the sell-off.
Market Experts Weigh In
Vaishali Parekh from Prabhudas Lilladher believes that for the Nifty bulls to regain conviction, a close above 23,000 is needed. She views 22,800 as a near-term hurdle, while 22,400 is a critical support level. A close below 22,400 could signal a further decline, with potential targets of 21,600 to 21,500.
Rupak De from LKP Securities noted that the Nifty has broken down from a bearish flag and pole pattern, signaling the start of a correction. Immediate support is at 22,450, with a break below this level potentially leading to a drop to 22,200 or lower. The upside remains capped, with resistance at the 22,670-22,700 range.
Osho Krishnan from Angel One emphasized that 22,500-22,400 is a crucial support zone for the Nifty. The ability to hold this range will determine whether further declines are likely. On the flip side, the bearish gap between 22,670 and 22,720 is expected to act as a strong resistance.
Nifty Bank Outlook
The Nifty Bank fell for the third consecutive day on Monday, although it outperformed the broader Nifty index. Despite a partial recovery of over 350 points from the lows, the index has now lost nearly 1,000 points in the last three sessions. The Nifty Bank now trades below the 49,000 mark, with the previous swing low of 47,844 acting as support and resistance at 49,150. A decisive move above 49,600 is critical for a bullish reversal.
Hrishikesh Yedve from Asit C Mehta Investment Intermediates noted that the Nifty Bank formed a doji candle, indicating uncertainty. Strong support lies around the 47,840 level, while 49,650 remains a key resistance.
F&O Cues: Key Movements
Short Covering: Stocks like Coforge, Indian Bank, M&M, United Spirits, and Glenmark Pharma saw short covering, with an increase in price but a decrease in open interest.
Long Position Unwinding: Stocks such as Indraprastha Gas, Tech Mahindra, HCLTech, Bharti Airtel, and NALCO saw a decline in both price and open interest.
Stocks to Watch for Tuesday's Session
NTPC Green Energy: Signed an MoU with Madhya Pradesh Power Generating Company for collaboration in renewable energy projects.
Biocon: Biocon Biologics launched Yesintek Biosimilar in the US, used in the treatment of Crohn’s Disease, Ulcerative Colitis, Plaque Psoriasis, and Psoriatic Arthritis.
PSU Banks: Government invites bids for the appointment of lead managers, brokers, and merchant bankers for PSU bank stake sales.
Texmaco Rail: Signed an MoU with Nevomo for high-speed rail solutions and predictive track maintenance.
ONGC: To invest ₹1,200 crore in ONGC Green through a rights issue to acquire a 100% stake in PTC Energy.
IREDA: Shareholders approve raising ₹5,000 crore via the QIP route.
