Nifty, Sensex, Nifty Bank outlook for today: Gift Nifty up 375 points; key levels to watch

Indian equity benchmark indices, after a day's hiatus, are set to open higher on Wednesday, mirroring gains in ​Asian peers, as hopes of a potential de-escalation in the ‌Middle East conflict eased concerns over surging oil prices and global inflation. US President Donald Trump said to military attacks ​on Iran within two to three weeks.

Nifty futures on the NSE International Exchange were 376.80 points, or 1.68 per cent, up at 22,803, hinting at a positive start for the domestic market on Wednesday. Stocks rallied at the ‌start of the Asian trading session on Wednesday on hopes of a de-escalation in the Iran conflict. KOSPI jumped 7 per cent, while Nikkei was up 4 per cent. Hang Seng dropped about 2 per cent.

Markets are likely to remain fragile, with crude prices, currency trends and foreign flows driving near-term direction with volatility expected to stay elevated amid an uncertain backdrop. With markets shut tomorrow for Mahavir Jayanti, the next session will reflect interim global developments, said Siddhartha Khemka, Head of Research at Motilal Oswal Financial Services.

Wall Street ended ​sharply higher on Tuesday, lifted by speculation about a potential de-escalation in the Middle East conflict. The S&P 500 jumped 2.91 per cent to end ​at 6,528.52 points. The Nasdaq rallied 3.83 per cent to 21,590.63 points. The Dow Jones Industrial Average rose 2.49 per cent to 46,341.51 points.

Brent crude futures moved 1.1 per cent higher to $105.16 a barrel to retrace some of the previous day's decline. The US dollar index nudged up 0.1 per cent to 99.8070 after logging its biggest one-day drop since March 19 on Tuesday. In cryptocurrencies, bitcoin was down 0.3 per cent at $67,988.87.

The downturn is driven by escalating geopolitical tensions in the Middle East, which dashed hopes of de-escalation and pushed crude oil prices higher, raising concerns over inflation and macro stability for oil-importing economies, said Ajit Mishra, SVP of Research at Religare Broking. "Persistent weakness in key sectors with elevated volatility, suggests continued downside risks."

Provisional data available with NSE suggest that FPIs turned net sellers of domestic stocks to the tune of Rs 11,163.06 crore on Monday. On the other hand, domestic institutional investors (DIIs) turned buyers of Indian equities to the tune of Rs 14,894.72 crore on a net-net basis.  

Nifty50 & Sensex outlook

Technically, the market broke a key support line at 22,500/72,500 and closed at 22,331/71,947. Based on the current market structure, 22,500/72,500 could pose a significant hurdle for the market in the short term. Below these levels, the market could soon decline to 22,100/22,000/71,300/71,000, said Shrikant Chouhan, Head Equity Research at Kotak Securities.

"A close below 22,000/71,000 would raise concerns. However, medium- to long-term investors may be tempted to invest in certain stocks given the current pattern of sudden price declines in the short term. Above 22500/72500, we may see some short covering, which could take the index towards 22,700/73,100 levels. The strategy should be to buy certain stocks between 22,100-22,000/71,300-71,000," he added.

From a technical standpoint, immediate support for the index is placed in the 22,150–22,200 range, while resistance is observed between 22,450 and 22,500, said Hitesh Tailor, Research Analyst at Choice Equity Broking. "The momentum indicator, RSI, stands at 32.01, suggesting that the index remains near the oversold zone and continues to reflect underlying weakness."

A long bear candle was formed on the daily chart, which is indicating a sharp reversal on the downside after a recent pullback rally of last week. The bearish chart pattern like lower tops and bottoms is intact on the daily chart and present weakness could be in line with the new lower bottom formation, said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.

"There is no confirmation of any lower bottom reversal yet at the lows. The underlying trend of Nifty continues to be weak. Having declined below the immediate support of 22,500, Nifty could now slide down to the next support of 22,000-21,900 levels in the near term. Immediate resistance is placed at 22,500," he adds.  

Nifty Bank outlook

The price structure of Nifty Bank remains decisively bearish, with sustained lower lows and selling pressure across constituents. The sharp cut highlights lack of support from heavyweight banking stocks, further dragging the index lower, underlining the relative underperformance in the latter part of the year, said Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities.

"For Bank Nifty, the immediate support is placed in the 49,900–49,800 zone. Any sustainable move below this zone could result in Bank Nifty extending its weakness towards 49,500, followed by 49,200 in the short term. On the upside, the zone of 50,600–50,700 zone is likely to act as an immediate resistance," he added.

Bank Nifty formed a second consecutive strong bearish candle, continuing the pattern of lower highs and lower lows. Volatility is likely to remain elevated in the near term, amid rising geopolitical tensions and higher crude oil prices, which continue to weigh on overall market sentiment, said Bajaj Broking.

"The index is expected to maintain a corrective bias and may drift towards the 49,000 level in the coming sessions. For any meaningful pause in the ongoing downtrend, the index needs to establish a sustained pattern of higher highs and higher lows, along with a close above last week’s high of 54,150," it added.