Outlook for Nifty remains bullish, adopt buy-on-dips strategy: Analysts

The Indian equity benchmarks paused their recent rally last week, with the Nifty ending just above the psychological 25,000 mark. However, the momentum indicators favour the bullish setup next week, according to analysts.

While the headline indices showed signs of mild pressure, the broader markets outperformed significantly. The BSE Midcap index gained 0.8 per cent, and the Smallcap index added 1 per cent, indicating continued buying interest beyond the large-cap space.

“This suggests that investors are becoming more confident in the market's breadth, often a bullish sign for the overall trend,” according to Kailash Rajwadkar of Choice Broking.

From a technical standpoint, the Nifty has recently broken out of a Rounding Bottom pattern on the weekly chart, supported by strong volumes—a bullish signal.

“The pattern projects an upside potential toward 28,000 in the short term. Immediate resistance is seen at 26,000–27,000 levels, where partial profit booking may be considered. On the downside, 24,300 and 24,000 are strong support zones; any correction toward these levels should be viewed as a buying opportunity, keeping the broader trend intact,” Rajwadkar mentioned in a note.

Momentum indicators also support the bullish setup. The Relative Strength Index (RSI) stands at 61.9 and is trending upwards, indicating growing strength. Furthermore, the Nifty is trading well above its key exponential moving averages — 20, 50, 100, and 200 — highlighting sustained positive momentum. This technical alignment continues to favour a buy-on-dips strategy.

In the derivatives space, market volatility cooled off slightly, with India VIX dropping 23.49 per cent to 16.55, reflecting a decline in fear and a more stable trading environment.

“However, heavy call writing at 25,500 and 26,000 levels signals resistance at higher zones, while strong put writing at 25,000 confirms it as a crucial support. Traders should keep a close eye on the 25,000 level—a sustained hold above it may trigger fresh buying interest, though a risk-managed approach is recommended in the near term,” said Rajwadkar.

Bank Nifty closed the week on a steady note, consolidating just below the key 56,000 mark. Despite limited movement in Friday's session, the index held firm above previous breakout levels, reflecting underlying strength in the banking space.

The weekly chart shows a breakout from a recent consolidation range, and the price action continues to hold above that breakout zone, signalling potential for further upside.

According to Nandish Shah, Senior Derivative and Technical Research Analyst, HDFC Securities, the Indian Rupee appreciated marginally by 5 paise against the US dollar, closing at 85.50 on Friday. This gain was supported by a weakening dollar index and easing crude oil prices.

Among the sector, Nifty Realty, Media and FMCG were top gainers while Nifty IT, Healthcare and Metal sector ended in the red.

“The short-term technical outlook for the Nifty remains bullish, as it continues to trade above its key short-term moving averages. The next resistance level for the Nifty is seen at 25,207, derived from the 76.4 per cent Fibonacci retracement of the previous major decline. On the downside, the 24,800 level could offer immediate support,” Shah noted.