Trade Setup for January 7: 26,150-26,100 zone key for Nifty as heavyweights underperform

Markets remained under pressure for the second consecutive session on Tuesday, with the Nifty slipping below its immediate support near the 26,200 mark.

The weakness comes a day after the index formed a fresh lifetime high, triggering some profit taking.

After a weak start, the Nifty staged a quick rebound, climbing 129 points to an intraday high of 26,273 within the first hour of trade. The bounce, however, was short lived, as selling pressure returned in the afternoon, pulling the index down nearly 150 points from the day's high to an intraday low of 26,124 around 2:30 pm.

The Nifty eventually closed 74 points lower at 26,175.

Apollo Hospitals, ICICI Bank and Tata Consumer led the charge, emerging as the top gainers in the Nifty pack, while Trent, Reliance Industries and Kotak Bank faced profit booking to finish among the top laggards.

Sectoral performance was a mixed bag, with healthcare, pharma and PSU banks clocking the strongest gains, even as oil and gas, media and chemicals bore the highest losses.

The broader market corrected in tandem with the benchmarks, as the Nifty Midcap 100 eased 0.19% and the Nifty Smallcap 100 slipped 0.22%.

Investors will keep a close watch on key global cues, including the US S&P Global Composite PMI, Eurozone CPI, ADP non farm employment data and JOLTS job openings.

Markets are expected to trade in a sideways to range-bound manner, as positive Q3 business updates are being weighed against geopolitical uncertainty. This back and forth is likely to persist in the near term, according to Siddhartha Khemka of Motilal Oswal.

Nagaraj Shetti of HDFC Securities expects the Nifty to attempt a bounce from supports around the 26,100 zone in the short term, with resistance seen near 26,400.

Nilesh Jain of Centrum Broking said the key support lies at the 21 day moving average near 26,020, and as long as the index holds above this level, a pullback towards the 26,250 to 26,300 zone remains possible.

He added that the volatility index continues to stay below the 10 mark, keeping conditions favourable for the bulls.

Rupak De of LKP Securities said the Nifty has been finding intraday support near 26,100 and is likely to remain range-bound in the near term. A sustained rally could emerge if bulls manage to push the index above 26,300, while downside support is placed at 26,000.

Despite near-term weakness, the broader positional trend remains bullish, as the Nifty continues to trade above key moving averages that have provided consistent support in recent weeks, said Nandish Shah of HDFC Securities.

Further, he said that the recent swing high of 26,373 will act as immediate resistance, with 26,100 seen as a crucial near-term support.

Meanwhile, Bank Nifty outperformed the frontline indices on Tuesday and formed a bullish candle with a minor upper shadow.

According to Sudeep Shah of SBI Securities, the 60,400 to 60,500 zone will act as an important hurdle for the index. A sustained move above 60,500 could open the door for further upside towards 61,100, followed by 61,600 in the short term. On the downside, support is seen in the 59,700 to 59,600 zone.