Trade Setup for January 6: HDFC Bank concerns to keep a lid on Nifty upside on weekly expiry?

Yes, the Nifty did make a record high to start the week for the second day in a row. 26,373 is now that level that will be registered as the new Nifty record. However, call it par for the course, routine profit booking, or some underlying concerns, there is some struggle to keep the index above the 26,300 mark.

The Nifty heavyweights, all three of them, reversing course on Monday did not help matters either; Reliance Industries, after hitting a record high of its own, HDFC Bank despite a strong business update, and IT stocks, courtesy of some bearish recommendations and downgrades ahead of them kickstarting the third quarter results season.

Make no mistake, barring a few odd ones like Avenue Supermarts and Union Bank, most of the third quarter business updates have been robust. Most banks, including HDFC Bank and the underperforming Bandhan Bank, have seen loan growth in double digits for the second quarter in a row. Majority of the retail and FMCG companies have also seen decent updates for the quarter gone by.

But there are concerns, geopolitical ones, concerns over lack of clarity on when will the US-India trade deal will happen, concerns about FIIs continuing to remain net sellers, despite an insignificant number on Monday, and of course valuations, which was one of the reasons cited by Bernstein behind its downgrade of the Indian markets earlier in the day.

For Tuesday's session, which also happens to be the Nifty weekly expiry, the index will have to defend 26,200 as a base on the downside, which it managed to do so on Monday, and sustaining above 26,300 will be key on the upside.

Rajesh Bhosale of Angel One said that on the downside, the 20-DEMA, coinciding with the session lows of the last two days, around 26,100 - 26,070 will be key support zones for the Nifty, while 26,400 - 26,500 levels, which are unchartered territory, will act as a barrier. He advises using any intraday dip as a buying opportunity.

The Nifty is placed at a key support levels as per the concept of change in polarity, said Nagaraj Shetti of HDFC Securities. He expects the Nifty to bounce from these 26,200 - 26,150 support levels in next one to two sessions and also sees the near-term Nifty target at 26,700.

The index to monitor though, will be the Nifty Bank, after the fall seen in HDFC Bank

, which also took shares of other lenders, barring CSB Bank, along with it. The index ended almost 400 points off the highs of the day, but managed to defend the mark of 60,000 on the downside.

The broader structure of the Nifty Bank chart remains positive as the index has delivered a falling trendline breakout and is also sustaining above its short-term 10 and 20-Day Exponential Moving Averages. The RSI too is in a bullish crossover, according to LKP Securities' Vatsal Bhuva. He advises maintaining a buy-on-dips strategy with immediate support at 59,700 and resistance at 60,500 levels. Positional support is seen at 59,300 levels.

Tuesday's trading session will also see the market react to business updates from stocks like Kotak Mahindra Bank, Dabur, IEX, Utkarsh Small Finance Bank among other names.