Indian equity benchmarks witnessed mild selling pressure after hitting record highs earlier this week, but the broader trend remains constructive, according to Vinay Rajani, AVP and Senior Technical & Derivative Analyst at HDFC Securities. Speaking to ET Now, Rajani characterized the recent decline in the Nifty as a "running correction" rather than a trend reversal, maintaining an optimistic outlook despite the index slipping over 200 points from its lifetime high.

Key Technical Levels and Market Structure

The Nifty continues to trade above its 20-day, 50-day and 100-day moving averages, indicating that the positional uptrend remains intact. Rajani emphasized the importance of specific technical levels for traders and investors to monitor.

"As long as the index holds above 26,100 on a closing basis, the bullish structure remains valid," Rajani stated, adding that this level should act as a stop-loss for traders holding long positions. On the upside, the recent peak of 26,373 remains an immediate resistance, with a sustained move above this level potentially opening the door for a fresh all-time high at 26,700.

Bank Nifty Demonstrates Relative Strength

In contrast to the broader market consolidation, Bank Nifty has been outperforming and remains technically strong. Banking stocks including ICICI Bank, Axis Bank, and Kotak Mahindra Bank are in clear uptrends, supporting the index's relative strength.

"Bank Nifty is likely to continue outperforming. Traders should hold long positions with a trailing stop-loss of 59,600," Rajani recommended. The analyst identified 60,450 as a key resistance level, representing the previous session's high, with a breakout above this level potentially signaling further upside momentum.

Individual Stock Analysis

Rajani provided specific commentary on notable stock movements, highlighting contrasting technical pictures for major names. Trent faced significant weakness following its Q3 updates, with the stock declining nearly 8.00% on heavy volumes and forming lower tops and lower bottoms on weekly charts.

"Technically, Trent looks weak in the short term. Traders should avoid catching a falling knife," he cautioned, noting that while the stock may present long-term investment opportunities, near-term momentum remains negative.

In comparison, Reliance Industries appears better positioned technically despite recent declines. The stock continues to trade above its 100-day and 200-day moving averages, maintaining its primary positive trend. "Reliance is likely to find support at lower levels and attempt a bounce, making it relatively stronger than Trent on positional charts," Rajani observed.

Market Outlook and Strategy

Despite the headline index consolidation, Rajani noted that several large-cap stocks continue to make fresh 52-week and all-time highs, suggesting selective strength within the market. This divergence indicates underlying resilience in specific sectors and individual names.

Rajani maintains a positive stance on Indian equities, advising market participants to stay aligned with the prevailing trend. "Momentum is missing at the index level, but sectoral and stock-specific opportunities remain. A catch-up rally in the Nifty cannot be ruled out if global cues remain supportive," he concluded, emphasizing the importance of selective stock picking in the current environment.

The Nifty index witnessed a mixed trading session, closing lower despite achieving a lifetime high earlier in the day. Following a strong finish from the previous week, the index came under selling pressure as investors engaged in profit booking activities, resulting in a red close for the first trading session of the week.

Market Dynamics and Technical Indicators

Jay Thakkar, Head Derivative and Quant Research at ICICI Securities, highlighted that the index has entered an overbought zone. A key technical indicator supporting this view is the Put-Call Ratio (PCR), which has risen beyond 1.60. This level has recently been associated with market corrections and increased volatility.

Derivatives Strategy Recommendation

Given the current market conditions characterized by rising implied volatility and expectations of range-bound movements, derivatives experts are suggesting the deployment of a Long Strangle strategy in Nifty. This options strategy is particularly suitable when traders expect significant price movement but are uncertain about the direction.

The Long Strangle strategy involves:

• Buying a call option out-of-the-money
• Buying a put option out-of-the-money
• Both options typically have the same expiration date

Market Outlook

The combination of the index reaching lifetime highs followed by immediate profit booking suggests that market participants are cautious about sustaining higher levels. The elevated PCR reading above 1.60 indicates increased hedging activity, which often precedes periods of heightened volatility. This environment creates opportunities for options strategies that can benefit from increased price swings regardless of direction.