Trade Setup for January 13: Nifty stages a comeback but sustaining the recovery remains key

Markets staged a smart intraday recovery after comments from US Ambassador Sergio Gor on the India-US trade deal helped lift sentiment. Buying also emerged at lower levels following five consecutive sessions of selling, aiding the rebound.

After opening 117 points lower, the benchmark Nifty 50 extended its decline in early trade to hit an intraday low of 25,473.40. However, strong buying near the day's low triggered a sharp recovery, with the market sustaining gains till the close.

The index recovered more than 140 points from its lows to finish near the session's high. The Nifty ended the day higher by 107 points at 25,790.

All major indices rebounded over 1% from their intraday lows, with the Nifty closing above the 25,750 mark.

Nearly 40 Nifty stocks ended in the green, led by Coal India, Tata Steel and Asian Paints. Indigo, Trent and Hindustan Unilever were among the top gainers, while selling pressure was seen in M&M, Eicher Motors and ONGC, which ended as the key losers.

Sectoral performance was mixed. Media, FMCG and consumer durables emerged as the top-performing sectors, while auto, pharma and financial services remained under pressure and closed lower.

Midcap and smallcap indices were largely flat, with the Nifty Midcap 100 down 0.12% and the Nifty Smallcap 100 up 0.2%.

On the macro front, India's December CPI inflation rose to 1.33% year-on-year from 0.71% in November, though it remains well below the RBI's comfort level. Investors are now awaiting US CPI data due tomorrow.

Siddhartha Khemka of Motilal Oswal expects markets to remain range-bound, with stock-specific action as the first leg of the earnings season unfolds.

IT stocks will continue to remain in focus on Tuesday after TCS results. Net profit for the period fell 12% from the September quarter to ₹10,657 crore. The company saw a one-time impact of ₹2,130 crore due to the new labor laws, which impacted profitability. The company has also made a provision towards a legal claim of ₹1,010 crore during the quarter.

According to Nagaraj Shetti of HDFC Securities, the underlying trend of the Nifty appears to have turned positive after the sharp weakness seen last week. Having recovered decisively from key lower levels, the index could advance towards the 26,000-26,100 zone over the next few sessions, he said.

LKP Securities' Rupak De said that the late-session buying is unlikely to alter the broader market sentiment. He added that the Nifty faces resistance in the 26,000-26,100 zone, where selling pressure may re-emerge, while immediate and crucial support is placed at 25,650.

Nandish Shah of HDFC Securities said a sustained move above 26,058 would signal a short-term bullish breakout, opening the path towards 26,202 and 26,330. On the downside, the 25,900 level is expected to act as short-term support.

The banking benchmark Bank Nifty found strong support near its 50-day EMA and staged an impressive rebound during the session, underscoring the importance of this level as a key support zone.

Going ahead, the 59,700-59,800 zone will act as a critical hurdle. A decisive move above 59,800 could trigger further upside towards 60,300 and 60,800 in the short term, while immediate support is seen in the 59,000-58,900 zone, according to Sudeep Shah of SBI Securities.