Trade Setup for June 1: Nifty hovers around key supports with RBI Policy the next major trigger

The Nifty 50 extended its decline for a third straight session on Friday, May 29, shedding 359 points, or 1.5%, to close at 23,547 amid broad-based selling across sectors.

After opening on a flat note, the benchmark index attempted a recovery in early trade but failed to hold gains. Selling pressure intensified through the session, dragging the index more than 500 points from the day's high.

Nearly 300 points of the decline came during the final 30 minutes of trade, signalling a sharp deterioration in sentiment and a loss of momentum following the recent failed breakout attempt.

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The broader market remained under pressure, with both the Sensex and Nifty ending nearly 2% lower. The Nifty Bank index fell more than 1%, while profit-booking also weighed on the broader market. The Nifty Midcap 100 and Smallcap 100 indices declined 1.33% and 0.85%, respectively.

Among Nifty constituents, Tech Mahindra, HCLTech and Wipro were the top gainers, while Power Grid, InterGlobe Aviation and ONGC led the losses. Sectorally, Nifty IT was the only index to close in positive territory, while Oil & Gas, Metal and Auto stocks were among the biggest drags.

The Indian rupee outperformed its Asian peers, appreciating 69 paise to its highest closing level since May 8. The currency posted its strongest single-day gain since April 2, aided by softer crude oil prices, suspected RBI intervention and optimism surrounding a possible extension of the US-Iran ceasefire.

Investors will closely track the RBI's monetary policy decision next week, along with developments in US-Iran negotiations, crude oil price movements and shipping activity through the Strait of Hormuz.

Read more: NSE makes changes to equity derivatives trading hours from August 3; details here

Any escalation in geopolitical tensions could trigger fresh volatility across global markets.

According to Nandish Shah of HDFC Securities, the Nifty continues to face strong resistance near its 50-day exponential moving average (EMA) at 23,981.

He said that the short-term trend has turned weak after the index slipped below key moving averages, while the previously breached 23,800 support level is now likely to act as resistance.

Shah added that Friday's low of 23,484 serves as immediate support. A decisive breach below this level could open the door for a decline towards the next support zone around 23,260.

LKP Securities' Rupak De said the Nifty repeatedly faced resistance near the 50-day EMA throughout the week before witnessing a sharp breakdown on Friday. The index has also broken below a rising trendline on the daily chart, indicating a revival of bearish sentiment.

He believes the correction could extend further in the near term, with the index potentially moving towards 23,250 and lower levels. On the upside, immediate resistance is placed near 23,700, and selling pressure is likely to persist as long as the index remains below that mark.

Meanwhile, the Bank Nifty traded in a narrow range of 55,184 to 54,761 before breaking lower in the second half of the session. The index ended the day at 54,239, down 1.12%.

Sudeep Shah of SBI Securities said immediate support for Bank Nifty is placed in the 53,800-53,700 zone.

A sustained move below this range could lead to further weakness towards 53,300 and then 52,900. On the upside, the 54,600-54,700 zone is likely to act as the immediate hurdle for the index.