The Nifty 50 is set for a steady upswing after India and Pakistan agree to a ceasefire over the weekend. Experts believe that a decisive move above 24,250 could trigger short-covering and lift the index toward 24,500. Will it be sufficient for the Nifty 50 to reach or breach the 25,000 level?
24,200 key level to watch for Nifty
Shrikant Chouhan, Head- Equity Research, explained that, “We believe a move above 24,200 could signal a pullback rally. Above this level, the market could bounce back to 24,500. A close above 24,500 would result in a move towards 25,000.”
“Even as Nifty closed in the red on Friday, 62% of its constituents bounced at least 1% from their respective lows, suggesting that most of the damage was limited,” said Anand James, Chief Market Strategist at Geojit Investments.
He added that “Though we certainly did not expect a vertical bounce back, we did go in last Friday expecting a consolidation rather than outright breakdown, given the support offered by the 200-day SMA near 24,050 (Nifty 50), as well as Fibonacci support near 23,870-23,950.”
This is contrary to usual bear moves, where a dead cat bounce is usually followed by a powerful plunge. This sets up for a bounce with a least objective of 24,260 and an optimistic objective of 24,770-24,850, added James.
“The 24,500 Call strike has accumulated heavy open interest of 51.04 lakh contracts, firmly marking it as a key ceiling. Meanwhile, the 24,000 Put strike saw substantial writing with 72.81 lakh contracts, confirming it as critical immediate support,” said Dhupesh Dhameja, Derivatives Research Analyst at SAMCO Securities.
How have markets reacted post-military operations
In 2016, after India held the Uri strike, markets rose 11.3% in a year, while in 2019, after the Balakot air strike, Indian indices increased by 8.9%. Even after the post-Kargil War, markets gained 29.4% in the following year.
Going forward in the week, markets will be watchful of key domestic macroeconomic indicators, CPI and WPI inflation data. The general consensus anticipates a potential softening in inflationary pressures.
First published in Financial Express