Is the Outlook for Nifty Bullish? Analysts Suggest Buy-on-Dips Strategy!

Mumbai, May 18 (NationPress) The Indian equity benchmarks have taken a breather from their recent surge last week, with the Nifty closing just above the psychological 25,000 threshold. Nevertheless, analysts suggest that the momentum indicators are in favor of a bullish outlook for the upcoming week.

Although the primary indices displayed signs of slight pressure, the broader markets showed remarkable outperformance. The BSE Midcap index rose by 0.8 percent, while the Smallcap index climbed by 1 percent, indicating sustained buying interest beyond just large-cap stocks.

“This indicates that investor confidence is increasing in the market's breadth, which is often a positive sign for the overall trend,” stated Kailash Rajwadkar from Choice Broking.

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

“The pattern suggests a potential upside toward 28,000 in the near term. Immediate resistance is anticipated at 26,000–27,000 levels, where partial profit booking may be advisable. On the downside, 24,300 and 24,000 are robust support zones; any correction toward these levels should be viewed as a buying opportunity, maintaining the broader trend,” Rajwadkar added in a note.

Momentum indicators also align with the bullish sentiment. The Relative Strength Index (RSI) is currently at 61.9 and trending upwards, indicating increasing strength. Additionally, the Nifty trades well above its key exponential moving averages—20, 50, 100, and 200—signifying sustained positive momentum. This technical alignment continues to favor a buy-on-dips strategy.

In the derivatives market, volatility has eased somewhat, with the India VIX falling 23.49 percent to 16.55, indicating a decline in fear and a more stable trading environment.

“However, significant 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 level. Traders should monitor the 25,000 level closely—sustaining above it may incite fresh buying interest, although a risk-managed approach is advised in the near term,” Rajwadkar noted.

Bank Nifty concluded the week on a steady note, consolidating just beneath the key 56,000 mark. Despite limited movement on Friday, the index remained robust above previous breakout levels, reflecting underlying strength in the banking sector.

The weekly chart reveals a breakout from a recent consolidation range, with price action holding above that breakout zone, suggesting potential for further upside.

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

Among sectors, Nifty Realty, Media, and FMCG were the top gainers, while Nifty IT, Healthcare, and Metal sectors ended in negative territory.

“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 projected at 25,207, derived from the 76.4 percent Fibonacci retracement of the previous major decline. On the downside, the 24,800 level could provide immediate support,” Shah observed.