Trade Setup for June 2: Nifty risks further downside to May series lows as headwinds mount

The Nifty extended its losing streak to a fourth straight session on Monday, shedding 165 points to close at 23,382, its lowest closing level since May 12, as selling pressure intensified across sectors.

The benchmark opened on a positive note with a 107-point gap-up, tracking strong global cues. However, the early gains proved short-lived as the index steadily slipped through the day and ended near its intraday low.

From the day's high, the Nifty reversed more than 375 points, highlighting persistent weakness at higher levels.

Among the index heavyweights, IT stocks offered some support, with Tech Mahindra, Infosys and Coal India emerging as top gainers. On the other hand, FMCG names including Hindustan Unilever, Tata Consumer Products and ITC weighed on the index.

Sectorally, only IT, Media and Metal indices managed to end in the green, while FMCG, PSU Banks and Realty were among the biggest laggards.

The broader market also witnessed continued profit-booking. The Nifty Midcap 100 index declined 1.45%, while the Nifty Smallcap 100 index fell 0.90%.

The Indian rupee erased its early gains to end largely flat against the US dollar after weakening more than 25 paise during the session. Rising crude oil prices and weak domestic equity sentiment kept pressure on the local currency.

On the macro front, GST collections for May stood at ₹1.94 lakh crore, up 3.2% year-on-year, although growth moderated compared to April. Bond markets also remained cautious ahead of the RBI's June 3-5 monetary policy meeting, with the benchmark 10-year government bond yield rising to around 7.02%.

Fuel costs remained in focus after commercial LPG prices were increased by ₹42-53.5 per cylinder from June 1. Multiple CNG price hikes in recent weeks are also expected to increase operating costs for sectors such as logistics, aviation, transportation and chemicals, potentially weighing on margins.

Textile stocks could remain on investors' radar after the government suspended customs duty on cotton imports from June 1 to October 30, a move aimed at improving raw material availability and easing input-cost pressures for the domestic textile sector.

From a technical perspective, analysts believe the trend remains weak as the Nifty continues to trade below its key moving averages.

Nandish Shah of HDFC Securities said the index remains in a broader downtrend across timeframes, with immediate support placed at the recent swing low of 23,262.

Shah said that a decisive break below this level could trigger a move towards the 23,000 mark. On the upside, the 23,700-23,800 zone is expected to act as a key resistance area.

Nilesh Jain of Centrum Finverse said that the Nifty faced strong resistance near its 50-day moving average at 23,690, indicating continued near-term weakness. According to him, a breach below 23,262 could accelerate selling pressure and drag the index towards 23,150.

Rajesh Bhosale of Angel One sees the 23,250-23,100 zone as an important support area. A sustained move below this range could open the door for a decline towards 22,700.

He added that the 24,000 region, where the 50-day exponential moving average is currently placed, remains a significant hurdle and is likely to continue attracting selling pressure on rallies.

LKP Securities' Rupak De expects the bearish undertone to persist, with the index potentially drifting towards 23,200 in the near term. Immediate resistance is seen around the 23,500 mark.

Meanwhile, Bank Nifty also remained under pressure throughout the session and continued to form a lower high-lower low structure. The banking index has corrected nearly 3.5% over the last four sessions after failing to sustain above its 50-day EMA.

Sudeep Shah of SBI Securities said immediate support for Bank Nifty is placed in the 53,200-53,100 zone.

A sustained breakdown below this range could extend the decline towards 52,700 and then 52,300. On the upside, the 54,000-54,100 zone is likely to act as the first resistance area.