Trade Setup for May 25: Nifty bulls look to West Asia with optimism as deal hopes rise

This has happened before. It has fizzled out too. But the Nifty bulls will be hoping that the West Asia negotiations are "x"th time lucky, and that a concrete and substantial deal is finally in place so that more clarity emerges on the road ahead. However, the uncertainties remain with both sides yet to put pen to paper and the contours remain unclear.

For the Nifty, which has been stuck in a 500-point range for the last month-and-a-half, some more clarity, and positive one at that, will be instrumental in taking the index first past the mark of 24,800, which it failed to sustain for all of last week, and then move towards the 20-DMA, which is around the mark of 24,000.

A positive outcome of negotiations will be beneficial for the markets in multiple ways. Firstly, oil prices go down, which is beneficial for the economy. Second, the currency and bond yields too, may see some appreciation, after the recent spate of weakness that they have witnessed and thereby roiling the markets as well, and lastly, the VIX coming down in case of a positive outcome will also give the bulls comfort.

For the Nifty, the upcoming week will also mean the monthly F&O expiry for the NSE contracts on Tuesday, and for the BSE contracts on Thursday. Positioning may also play a key role in how the market will shape up amidst a slew of headlines emerging from West Asia.

While the range for the Nifty remains the same, with 23,300 on the downside and 24,000 on the upside, it would be fair to assume that the base has shifted higher the index managed a close above 24,500 for every single day of the week gone by. On the upside, the bulls would have their sights on conquering 24,000 first, and then closing above it.

Aarti Pharma Labs, Aditya Birla Fashion & Retail, Ajmera Realty, Awfis Space Solutions, BlueJet Healthcare, Campus Activewear, CONCOR, Crizac, IFB Industries, NBCC, Nesco, Orchid Pharma, Pace Digitek, Poly Medicure, Hitachi Energy India, RVNL, Saksoft, SEPC, Suprajit Engineering, Surya Roshni, Suzlon Energy, Travel Food Services, Yatharth Hospitals are some of the companies that will be reporting their results on Monday.

The first trading day of the new week will also see earnings reactions from companies like Hindalco, Eicher Motors, Torrent Pharma, Colgate-Palmolive, Indigo Paints and others.

Key Levels To Watch

"For the Nifty positional traders, the 50-day SMA or 23,700 would act as an immediate support zone. As long as the market remains above this level, the positive sentiment is likely to continue. On the higher side, 23,850 could act as an immediate resistance for the bulls. A successful breakout above 23,850 could push the market up to 24,000 – 24,200," Amol Athawale of Kotak Securities said.

Nagaraj Shetti of HDFC Securities said that the underlying trend of the Nifty is choppy with a positive bias. A move only above the 23,850 - 23,900 levels can open broad-based buying on the index for a move up to 24,150 levels in the near-term, he added. Shetti also said that any potential weakness can find support around 23,600 levels on the downside.

For the Nifty Bank, which also closed the week with gains, the bulls will take heart from the fact that the index managed to sustain and close above the mark of 54,000, which the Nifty failed in doing, which is closing above 23,800. The Nifty Bank is also at the upper end of the range of 53,000 - 54,000 and the bulls would hope to sustain above that and move higher towards levels of 54,500.

"On the downside, the 53,700 zone remains the immediate support, followed by 53,450. On the upside, 54,500 remains the first resistance, followed by 54,750. A close above the 54,600 confluence zone would strengthen the recovery and open the path toward higher levels," Om Mehra of SAMCO Securities said.

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