Trade Setup for January 27: Nifty's recent lows of 24,900 remain under threat as budget week begins

After a brief pause, the Nifty resumed its downtrend on Friday, sliding 241 points to close at 25,048, its lowest level in the ongoing correction.

The index opened higher, tracking strong global cues, but failed to sustain gains as profit booking emerged at higher levels. Selling pressure intensified through the session, particularly in the mid to late hours, dragging the Nifty to end the day at its lows.

The broader trend remained weak throughout last week, with the Nifty decisively breaking below its long-term 200-day moving average, placed at 25,140. On a weekly basis, the index declined 2.51%, marking its lowest close since the week ended October 3, 2025.

Within the Nifty pack, Dr Reddy's Laboratories, ONGC and Tech Mahindra ended as the top gainers, while Adani Enterprises, Adani Ports and ETERNAL bore the brunt of selling and finished as the biggest laggards.

Selling pressure was broad-based, with all sectoral indices closing in the red. Realty, Media, PSU Banks and Auto stocks were among the worst performers.

The weakness was even more pronounced in the broader market, where the Nifty Midcap 100 and Nifty Smallcap 100 plunged 1.80% and 1.95%, respectively.

On the macro front, investors will closely track US consumer confidence data due on Tuesday, alongside the US Federal Reserve's interest rate decision and the Union Budget 2026, which are expected to be key market triggers this week.

Markets will also continue to monitor developments around global trade negotiations and geopolitical dynamics, while stock-specific action is likely to be driven by ongoing Q3 earnings announcements, said Siddhartha Khemka of Motilal Oswal.

Key companies that announced results over the weekend include Kotak Mahindra Bank, UltraTech Cement and Axis Bank, while Tata Consumer Products and Asian Paints are among those set to report earnings on Tuesday.

Nilesh Jain of Centrum Broking said that while a short-term pullback cannot be ruled out, the Nifty needs to decisively reclaim the 25,300 level to trigger any meaningful short-covering rally towards the 25,600 zone. On the downside, a breach below 25,000 could intensify selling pressure and drag the index towards 24,800.

Nagaraj Shetti of HDFC Securities said the overall chart pattern remains negative and expects the Nifty to slide below the recent low of 24,900 by next week.

According to Shetti, the near-term downside target is seen around 24,600, while immediate resistance is placed at 25,200.

LKP Securities' Rupak De said that the index remained weak throughout the session, trading below the 20 EMA on the hourly chart. He added that the Nifty slipping below the 200-day moving average on a closing basis suggests capitulation by bulls after a failed attempt to defend the key long-term support.

As long as the index stays below 25,500, short- to medium-term sentiment is likely to remain weak, with downside risks extending towards 24,700 in the near term.

Meanwhile, the Bank Nifty traded in a narrow range during the first half of the session before succumbing to selling pressure and closing below the 58,500 level. On the daily chart, the index has slipped below its 50-day EMA, indicating short-term trend weakness.

For Bank Nifty, immediate support is seen in the 58,100-58,000 zone, which coincides with the 100-day EMA and remains a crucial demand area to watch, said Sudeep Shah of SBI Securities.

A sustained breakdown below this zone could open the door for further downside towards 57,500, followed by 57,000. On the upside, the 58,900-59,000 zone is expected to act as strong resistance, capping any recovery attempts.