Indian equity markets are positioned for a potential relief rally in the shortened trading week following encouraging signals from the United States regarding trade tariffs. US Treasury Secretary Scott Bessent indicated on Friday the potential removal of an additional 25% tariff on India, providing a catalyst for optimism despite ongoing foreign institutional investor (FII) selling pressure.

Technical Analysis and Support Levels

Market analysts have identified critical technical levels that will determine the near-term direction of the Nifty. The consensus points to strong support in a specific zone, with resistance levels clearly defined for any potential recovery.

Chandan Taparia, Head of Derivatives & Technicals at Motilal Oswal Financial Services, notes that the index is approaching a major structural support zone while showing oversold signals across most momentum and mechanical indicators. Historically, all intermediate corrections since 2020 have found support around the 20-month moving average, currently positioned near the 24,650-24,800 zone.

Market Dynamics and FII Impact

The immediate trend remains weak amid global uncertainties and sustained FII selling pressure. However, technical analysts point to several encouraging factors that could support a recovery. The recent correction aligns with seasonal patterns, as January has typically been a negative month in most of the past seven years.

Historical data suggests that weakness in January and February often creates opportunities for a stronger March-April phase, indicating that market participants can gradually accumulate selective positions for the next recovery leg.

Expert Trading Strategies

Market experts have outlined specific strategies for navigating the current environment:

Motilal Oswal Strategy:

• Bear Put Spread for February 24 expiry
• Buy 25,000 strike put at ₹323 premium
• Sell 24,500 put at ₹173 premium
• Maximum risk: ₹9,750 per lot
• Maximum profit: ₹22,750 per lot

Kotak Securities Approach: Amol Athawale from Kotak Securities recommends level-based trading, noting that as long as Nifty trades below the 100-day SMA near 25,500, the weak formation is likely to persist.

Stock Recommendations

Analysts have identified specific stocks showing technical strength despite broader market weakness:

Buy Recommendations:

Sell Recommendation:

• Indian Energy Exchange February Futures: CMP ₹127.50, Stop Loss ₹137, Target ₹108

Market Outlook

The convergence of technical oversold conditions, potential tariff relief, and historical seasonal patterns suggests that current levels may present accumulation opportunities for patient investors. However, any sustainable recovery will require a moderation in FII selling pressure and the index's ability to reclaim key resistance levels above 25,600.

The Nifty has breached a critical technical level, falling below its 200-day moving average for the first time in nearly ten months amid sustained foreign institutional investor (FII) outflows and rupee weakness. This development has shifted market sentiment decisively cautious as investors brace for the upcoming Budget announcement.

Technical Outlook and Trading Strategy

Rupak De, Senior Technical Analyst at LKP Securities, highlights that the index has corrected approximately 5.00% from its all-time high in a steady decline. The breach of the 200-day moving average represents a significant technical breakdown that often erodes long-term investor confidence.

The analyst expects the correction to continue, with the index likely to remain under pressure as long as it trades below the 25,500 level. On the downside, the Nifty could drift lower towards the 24,700-24,400 zone.

Historical Budget Performance

Historical analysis reveals a concerning pattern for pre-Budget market performance. Over the past 15 years, the Nifty has delivered an average negative return of 0.52% in the week leading up to the Budget, closing higher on only eight occasions out of 15.

This time, the trajectory appears even more challenging, with three of the four major indices that led the November-December rally struggling in January. The analyst expects sentiment to remain weak at least until the Budget, with only meaningful structural changes in the Budget potentially helping shift market mood in February.

Sector-Specific Challenges

Several sectors are facing specific headwinds in the current environment. Kalyan Jewellers shares fell 21.00% during the week amid speculative reports of mutual fund selling. The stock has broken below the 61.8% Fibonacci retracement level and is approaching its 200-week moving average at 344. A bounce may emerge only if the stock avoids a decisive slip below this level.

Realty stocks emerged as the biggest losers last week, with selling pressure expected to persist in the short term. The realty index could drift towards the 657 level, from where a potential bounce may emerge.

Trading Recommendations

Despite the broader market weakness, the analyst has identified three specific trading opportunities:

Chennai Petroleum Corporation has managed to stay above the 20-day exponential moving average despite broader market sell-off, with RSI forming a positive crossover indicating improving momentum. The target of 880 aligns with the 50-day DMA placement.

Ashok Leyland has delivered a consolidation breakout on the daily chart and consistently held above the 20-day EMA. The RSI shows a bullish crossover and trending higher, supporting the upside target of 205.

Bank of Maharashtra has remained strong over recent sessions, sustaining above its breakout level on the weekly chart with RSI forming a bullish crossover on the weekly timeframe.

Budget Day Trading Considerations

The upcoming Budget falls on a Sunday, but trading will remain open as usual. The analyst expects sharp swings around key announcements but does not anticipate the Sunday factor to materially impact sentiment or add extra excitement to the proceedings. Market participants should prepare for typical Budget day volatility patterns despite the unusual timing.