Trade Setup for February 4: Nifty on the mend but higher levels continue to remain a barrier

The Nifty logged its biggest single-day absolute gain of over 1,200 points on Tuesday, buoyed by long-awaited tariff cuts by the US on Indian imports.

The index opened with a sharp gap-up and surged to an intraday high of 26,341, just short of its record peak, before early profit booking trimmed gains.

The market later recovered from lower levels as buying interest returned.

Investor sentiment improved sharply after months of uncertainty surrounding the India-US trade agreement finally eased, a factor that had weighed heavily on markets in recent weeks.

The initial rally added nearly ₹20 lakh crore to the market capitalisation of BSE-listed companies.

The Nifty eventually settled 639 points higher at 25,727, marking its strongest single-day percentage gain since May 12, 2025.

The Bank Nifty also touched a fresh all-time high of 61,764 and closed with a solid 2.4% gain.

Within the Nifty 50, Adani Enterprises, Adani Ports and Jio Financial Services led the rally, while Tech Mahindra, BEL and SBI Life saw profit booking from higher levels.

All sectoral indices ended in the green, led by Realty, Chemicals and Financial Services.

The broader market kept pace with the benchmark, with the Midcap 100 rising 2.84% and the Smallcap 100 gaining 2.82%.

With trade-related uncertainty now easing, Siddhartha Khemka of Motilal Oswal said the market could see multiple positives unfold, including a reversal in FII outflows, recovery in the rupee and a broader improvement in sentiment towards Indian equities.

He expects the near-term momentum to remain positive, supported by sector and stock-specific action driven by recent trade deals with the US and EU, Union Budget announcements and the ongoing Q3 earnings season.

What do Nifty 50 charts suggest?

From a technical standpoint, the Nifty reclaimed its long-term 200-DMA at 25,250 and the 100-DMA at 25,630.

Nagaraj Shetti of HDFC Securities said that as long as the index sustains above 25,600, the probability of a move towards 26,000 and then 26,300 remains high in the near term. He added that 25,600 now acts as an immediate support.

Nilesh Jain of Centrum Broking said that the Nifty's structure looks positive for a move towards 26,100, with a buy-on-dips strategy remaining favourable as long as the index holds above 25,250.

LKP Securities' Rupak De pointed to a swift shift in sentiment within a single session, from "sell on rise" to "buy on dips". He said immediate support lies in the 25,470-25,500 zone, while resistance is placed between 26,000 and 26,200.

Vinay Rajani of HDFC Securities said the Nifty's 1,770-point rebound from the recent swing low of 24,571 has pushed the index back above its 20, 50, 100 and 200-day EMAs, signalling a bullish trend reversal across timeframes.

According to him, key support is seen in the 25,500-25,650 range, with resistance at 25,863 and 26,373.