Trade setup for December 23: Nifty faces key support at 23,263 amid worst week of 2024

The Indian equity markets witnessed a significant sell-off last week, marking their worst week in 2024. With Foreign Institutional Investors (FIIs) continuing their persistent selling, coupled with the hawkish stance of the US Federal Reserve, the market faced major headwinds, interrupting any recovery momentum.

Market Overview:

The Sensex plummeted by 1,000 points in three out of five trading sessions last week, with the Nifty slipping below key support levels, closing at a one-month low of 23,587.50. This decline marked a sharp 4.77% drop—the biggest weekly fall of 2024.

Broad-based selling was seen across the market, with only two stocks from the Nifty 50, Dr. Reddy's Laboratories and Cipla, managing to post gains.

Heavyweight sectors such as banking and IT, which had been market support, are now showing signs of weakening. The decline in the rupee and a strong performance from US markets, leading to outflows, have compounded the challenges.

The market capitalization of all BSE-listed companies shrank by ₹19 lakh crore last week, with most Nifty stocks showing negative returns.

Technical Outlook for Nifty:

The Nifty has broken below the 200-day Moving Average (DMA), signaling further potential weakness in the medium term. The RSI on both the daily and weekly charts has dropped below 45, indicating a loss of upward momentum.

According to Om Mehra from SAMCO Securities, the immediate support lies at the swing low of 23,263, a level that is crucial to hold to avoid deeper corrections. If this support fails, the Nifty could test lower levels.

Analysts suggest that the 24,200 mark will act as a key resistance in the short term. Key technical indicators, including the Moving Average Convergence Divergence (MACD), have also shown a negative crossover, further supporting the bearish outlook.

A decisive breakdown below the 200-day Exponential Moving Average (DEMA), currently around 23,692, could signal further downside potential for the Nifty.

Outlook for Bank Nifty:

The Bank Nifty index closed at 50,759.20, down 1.58% on Friday and marking a 5.27% decline over the week.

Mehra identifies 49,787 as a critical support level, and if breached, the index could head further down. Resistance for the Bank Nifty lies at 51,500, followed by 51,800.

A key range to watch for Bank Nifty in the short term is between 50,500 and 51,200, which will determine the direction of the next move.

Stocks to Watch Ahead of Monday’s Trading:

Reliance Industries: Its arm, Reliance Digital Health, has acquired a 45% stake in US-based Health Alliance Group for $10 million to develop a virtual diagnostic and care platform.

Vedanta: The company has revised its demerger plan, deciding to retain its base metals business within the parent company. This decision comes after consultations with stakeholders and has been approved by the Board.

UltraTech Cement: It is acquiring a 32.72% stake in India Cements and making an open offer for 26% equity from the public at ₹390 per share.

Piramal Enterprises: The board has approved raising up to ₹2,000 crore through Qualified Institutional Placements (QIPs).

Fortis Healthcare: It has acquired a 7.61% stake in Agilus Diagnostics for ₹429.37 crore.

NTPC Green Energy: The company has signed an MoU with the Bihar Government for investments in renewable energy projects.

Aurobindo Pharma: Its arm, CuraTeQ Biologics, has received marketing authorization from the UK’s Medicines and Healthcare products Regulatory Agency (MHRA) for Bevqolva, a cancer treatment drug.

RBI Penalties: The Reserve Bank of India imposed penalties on IndusInd Bank (₹27.3 lakh) and Manappuram Finance (₹20 lakh) for non-compliance with regulations related to savings deposit accounts and financial inspections.

The Nifty appears poised to retest the critical support level at 23,263 in the coming sessions. With technical indicators pointing to continued bearish momentum, traders should stay cautious and watch FII inflows and global market cues for further direction. The ongoing holiday-shortened week is likely to bring heightened volatility, especially with the expiry of December's derivative contracts.