Trade setup for November 25: Nifty to see gap-up on Monday following Mahayuti win?

The Nifty50 index saw a robust recovery, moving above the 200-day moving average, signaling an improving trend. Breaking out of a period of congestion on the daily timeframe, the Nifty is poised for positive movement.

On Monday, the Indian equity market is expected to react to the outcomes of the state assembly elections in Maharashtra and Jharkhand, alongside global triggers such as developments in the Russia-Ukraine conflict. The BJP-led Mahayuti alliance achieved a decisive victory in Maharashtra, securing more seats than predicted by exit polls.

This political stability is likely to boost investor sentiment, particularly in sectors like infrastructure, urban development, and manufacturing that align with BJP policies. Stability in Maharashtra could trigger a stock market rally, enhancing investor confidence due to the continuity of pro-business policies, especially after previous coalition uncertainties.

Friday’s gains helped the market turn positive for the week, breaking a two-week losing streak and regaining half of the losses from the prior week. Notably, 34 out of the 50 Nifty stocks recorded gains during the week. The Nifty posted its best single-day gain in over five months on November 22, rising nearly 2.4%. Buying at lower levels in blue-chip stocks fueled the rally, with several index heavyweights, including Reliance, posting significant gains. Adani Group stocks also recovered, climbing up to 14% from recent lows. These gains helped BSE-listed companies add ₹7 lakh crore in market capitalization.

Despite a weak Q2FY25 earnings scorecard overall, excluding commodities, it reflected in-line earnings growth. Siddhartha Khemka of Motilal Oswal expects a recovery in corporate earnings moving forward. However, Khemka anticipates continued market volatility driven by state election outcomes, FII activity, and global geopolitical concerns.

Foreign institutions remained net sellers in the cash market on Friday, while domestic institutions were net buyers.

Nifty50 Charts Analysis:

The Nifty50 index ended the session with an impressive 2.39% gain at 23,907.25, marking a strong relief rally and a weekly gain of 1.59%. A gap-up start for Nifty 50 and Nifty Bank on Monday cannot be ruled out.

"The Nifty formed a bullish engulfing pattern on the daily timeframe, reclaiming the 10 DMA and 200 DMA, though still trailing the 20 DMA. On the hourly chart, an inverse head-and-shoulders pattern hints at potential upside, projected to the 24,150–24,200 range. Support has now shifted higher to 23,600 levels. The short-term strategy has altered from ‘sell on the rise’ to ‘buy the dip’, indicating a bullish undertone," said Om Mehra, Technical Analyst, SAMCO Securities.

As long as the market is trading above the 200-day SMA or 23,600, the pullback formation is likely to continue, believes Amol Athawale of Kotak Securities. On the higher side, it could move up to 24,000-24,200. On the flip side, below 23,600, the sentiment could change, prompting traders to exit trading long positions.

Rupak De of LKP Securities noted that the Nifty's strong recovery above the 200DMA indicates an improving trend. The RSI has entered a bullish crossover near the oversold zone, suggesting positive momentum. Immediate resistance is seen at 23,960–24,000. A decisive move above 24,000 could trigger a rally toward 24,500. Supports are placed at 23,750 and 23,550.

Nifty Bank Charts Analysis:

Nifty Bank ended the session at 51,135.40, with a gain of 1.51%. The index now holds above its 10-day moving average and is nearing a breakout above the 20-day moving average. Experts believe 50,500 and 50,300 would be key support zones while 20-day SMA or 51,250 and 50-day SMA or 51,850 could be crucial resistance areas for short-term traders.

"A sustained move beyond this level could provide significant room for further upside. Nifty Bank is also approaching the average line of the daily RSI, which may enhance bullish momentum and strengthen the ongoing trend. The resistance remains at 51,800, while support has shifted upward to 50,700," Mehra added.