Trade Setup for February 13: Nifty fails to cross key hurdles but analysts see correction to be short-lived

The bulls took a breather on Thursday as the Nifty 50 snapped its four-session winning streak, declining 146 points to close at 25,807.

After a gradual upmove over the past few sessions, the index slipped into weakness. Following a soft opening, the market extended losses through most of the day.

Brief intraday bounces failed to sustain momentum, keeping the tone subdued.

The index largely traded in a narrow 25,750-25,850 range, resulting in a lacklustre session.

Bajaj Finance, Shriram Finance and Eicher Motors were among the top gainers on the Nifty. On the other hand, IT heavyweights Tech Mahindra, Infosys and TCS faced sharp selling pressure and ended as major losers.

The broader mood favoured the bears, with most sectoral indices closing in the red. The Nifty IT index was the biggest drag, tumbling 5.5% to a ten-month low.

The decline mirrored a global sell-off in software stocks amid rising concerns that AI startups are beginning to disrupt the business models of established technology firms.

Meanwhile, Infosys Ltd’s American Depository Receipts (ADRs) were trading over 4% lower in Thursday’s session, extending the recent slide. Peer Wipro Ltd also came under pressure, with its ADR down 3.35%.

Broader markets also saw profit booking. The Nifty Midcap 100 fell 0.47%, while the Nifty Smallcap 100 declined 0.64%.

Meanwhile, the rupee strengthened by 11 paise against the dollar to close at 90.59, driven by FII inflows and likely RBI intervention.

Nagaraj Shetti of HDFC Securities said the near-term trend of the Nifty remains positive.

The current consolidation or downward correction could be short-lived, and the index may bounce from lower levels. Immediate support is placed around 25,600, he added.

Rupak De of LKP Securities said that despite the correction, the Nifty managed to close above its 20DMA, keeping the possibility of a recovery intact.

On the upside, resistance remains at 26,000. On the downside, support is seen at 25,750 and 25,500, he said.

Sudeep Shah of SBI Securities said the 50-day EMA zone of 25,700-25,670 will act as a key support area. On the upside, the 25,900-25,940 zone is expected to act as an immediate hurdle.

A sustained move above 25,940 could trigger a rally towards 26,100 in the short term, he added.

Nandish Shah of HDFC Securities said the Nifty failed to surpass the crucial 26,000 resistance and closed below its 5-DEMA, currently placed at 25,817. The index partially filled the gap support zone of 25,703-25,780 and closed slightly above it. The 50-day EMA, placed at 25,685, may act as immediate support.

He added that the positional trend remains bullish as the Nifty continues to trade above its 20, 50 and 100-day EMAs.

However, for fresh bullish momentum, the index needs to decisively cross 26,000 to attempt a new all-time high above 26,373.