Trade Setup for April 8: Nifty recovery hinges on overnight action between US-Iran as deadline nears

The relief rally gathered momentum on Tuesday, with the Nifty rising for a third consecutive session and closing 155 points higher.

The index staged a smart recovery after a gap-down opening. Following a weak start and initial decline, the market rebounded sharply from the day's lows, with buying momentum strengthening through the mid to latter half of the session.

On the sectoral front, Nifty IT ended the day as the top sectoral gainer with gains of 2.5%, followed by Nifty Realty, which ended the day with a gain of 1.67%.

Nifty IT is now placed in the leading quadrant of RRG (Relative Rotational Graph), indicating strength and momentum in the index.

On the other hand, Nifty Tourism and Nifty PSU Banks both ended the day as top sectoral losers. With regards to stocks, Wipro and Hindalco ended up as top two gainers while Dr Reddy and IndiGo ended with losses.

The Midcap Index mirrored Nifty's broader trajectory, opening with a gap down before recovering swiftly as the session wore on.

Going ahead, Nagaraj Shetti of HDFC Securities said the underlying trend for the Nifty remains positive, with the next upside levels seen at 23,500-23,600, while immediate support is placed at 22,900.

Rupak De of LKP Securities said that near-term sentiment remains positive, supported by three straight sessions of gains. However, he cautioned that ongoing tensions in the Middle East could keep markets volatile.

He sees resistance at 23,200, with a decisive breakout potentially triggering the next leg higher towards 23,500-23,800. On the downside, support is placed at 23,000.

Om Mehra of Samco Securities said the recovery has been gradual rather than sharp, indicating easing selling pressure. He added that another positive close could strengthen base formation and push the index towards 23,300-23,350.

Key support lies in the 22,800-22,500 zone. While the near-term trend has improved, global developments could continue to drive volatility.

Meanwhile, Bank Nifty opened weak and traded within a narrow range for most of the session. However, it broke out in the latter half, ending at 52,716 with a modest gain of 0.20%.

Sudeep Shah of SBI Securities said immediate resistance for Bank Nifty is seen in the 53,100-53,200 zone. A sustained move above this could extend the pullback towards 53,500 and 53,800 in the short term. On the downside, the 52,300-52,200 zone is likely to act as immediate support.