Trade Setup for April 6: Nifty aims to continue recovery amidst war uncertainties, Q4 updates key

After Wednesday's brief respite, the Nifty opened sharply lower on Thursday, slipping 300 points to 22,383. Selling pressure intensified in early trade, dragging the index down to an intraday low of 22,182 within the first hour.

However, a strong reversal after 10:15 am changed the tone, with the index rebounding nearly 600 points from the lows.

Despite late-session volatility, the Nifty managed to close 33 points higher at 22,713.

Even with this recovery, the index ended the week with its sixth straight loss, down 0.47%, marking its longest losing streak since the Covid-19 period.

Within the index, HCL Tech, Tech Mahindra and Tata Consumer emerged as the top gainers, while Asian Paints, Eicher Motors and Sun Pharma saw the most selling pressure.

Sectoral trends remained mixed, with IT, realty and metals leading gains, while consumer durables, pharma and healthcare lagged.

The broader markets mirrored the volatility. The Nifty Midcap 100 and Smallcap 100 indices rebounded over 3% from their lows but eventually closed with marginal losses.

Looking ahead, volatility is likely to persist, with investor sentiment closely tracking developments in the ongoing West Asia conflict. The start of the Q4 earnings season is expected to add another layer of uncertainty.

The March quarter saw headwinds from currency depreciation, elevated input costs, particularly crude-linked, and uneven global demand.

Tata Consultancy Services is set to report earnings on April 9, which will be closely watched as it may set the tone for the IT sector and the broader earnings season.

Overall, markets are expected to remain volatile amid geopolitical uncertainty, crude price movements, FII flows and global macro cues.

Any de-escalation in West Asia could ease pressure through softer crude prices and a more stable currency, while escalation may keep risk aversion elevated and weigh on foreign inflows.

Nagaraj Shetti of HDFC Securities said buying interest has emerged near the 22,200 mark, but the Nifty needs to sustain above 23,000 to signal a potential bottom reversal. Immediate support is seen at 22,400.

Nilesh Jain of Centrum Finverse noted that the sharp rebound from 22,180 could act as a key support going forward. While the broader trend remains weak, a pullback towards 23,200 is possible.

A decisive move above 23,500 would be required to negate the bearish setup and open the path towards 24,000, Jain said.

Rupak De of LKP Securities said the index could move towards 23,300 in the near term, while support is placed at 22,500. A break below this level may lead to a consolidation phase.

For Bank Nifty, Sudeep Shah of SBI Securities sees immediate support in the 51,100-51,000 zone. A sustained break below this range could extend weakness towards 50,500 and 50,000.

On the upside, the 52,000-52,100 zone is likely to act as immediate resistance.