Trade Setup for January 29: Nifty momentum builds on budget optimism amidst Fed, results

The bulls staged a strong comeback in the market as the Nifty extended its rebound for the second consecutive session, ending near the day's high and closing above the 25,300 mark.

The index opened 83 points higher at 25,258 and surged to 25,372 within the first 15 minutes of trade. After the early spike, the Nifty moved in a narrow, zigzag range until around 2 pm before witnessing a sharp rally of nearly 171 points from the intraday low.

The benchmark ultimately settled 167 points, or 0.66%, higher at 25,342.

BEL, ONGC, and Coal India led the gains on the Nifty, while Tata Consumer, Asian Paints, and Maruti came under pressure and ended the session as the top laggards.

Sectorally, barring FMCG, Pharma, and Healthcare, all indices closed in the green. Oil & Gas, Chemicals, Metals, and Media stocks outperformed, posting the strongest gains of the session.

Broader markets mirrored the benchmark's strength, with the Nifty Midcap 100 jumping 1.70% and the Nifty Smallcap 100 rising 2.20%.

On the global front, investor focus remains on the US Federal Reserve's interest rate decision later today, though rates are widely expected to remain unchanged.

Domestically, attention is gradually shifting to the upcoming FY27 Union Budget, which is expected to strike a balance between sustaining growth momentum and maintaining fiscal discipline.

Market participants are looking for a continued focus on higher capital expenditure across sectors such as defence, infrastructure, affordable housing, power, and capital goods.

Looking ahead, the recent positive momentum could extend, supported by optimism around the India-EU FTA, the Union Budget, and ongoing Q3 earnings, said Siddhartha Khemka of Motilal Oswal.

From a technical perspective, Nagaraj Shetti of HDFC Securities said a sustained move above the 25,450-25,500 zone could pave the way for a broader rally towards 25,800 in the near term, with immediate support placed at 25,200.

The Nifty continues to trade above its long-term 200-day moving average placed at 25,170, which is likely to act as a key support, said Nilesh Jain of Centrum Broking.

He added that the overall structure remains positive, with scope for the uptrend to extend towards the 25,500-25,600 zone, where the immediate hurdle of the 100-DMA is placed.

Jain expects the index to trade within a broader range of 25,200 to 25,600 in the short term.

Meanwhile, Sudeep Shah of SBI Securities said the key support for the Nifty lies in the 25,200-25,150 zone, coinciding with the 200-day EMA. A decisive break below this region could drag the index towards 24,900, followed by 24,600 in the near term.

Nandish Shah of HDFC Securities said that the short-term trend has turned positive as the Nifty has crossed its 5-day EMA resistance placed at 25,270. He sees immediate resistance at 25,435, followed by the positional 50-day EMA resistance at 25,725.