Trade Setup for February 3: Nifty bulls recover most of Sunday's loss but upside worries remain

After a sharp sell-off on Union Budget 2026 day on Sunday, February 1, the Nifty 50 staged a strong rebound on Monday, reclaiming the 25,000 mark and closing above 25,050.

The index opened on a weak note and slipped deeper into the red in early trade, but a sharp reversal later in the session saw it recover 429 points from the day's low of 24,679.

The Nifty eventually settled 262 points higher at 25,088.

Power Grid, Tata Motors (Passenger Vehicles) and Adani Ports were among the top gainers on the index, while Shriram Finance, Axis Bank and Max Healthcare ended the session as the key laggards.

Sectorally, all indices closed in the green barring Nifty IT and Healthcare, with Auto, Oil & Gas and Metals leading the rebound.

The broader market echoed the recovery, with the Nifty Midcap 100 rising 0.96% and the Smallcap 100 gaining 0.64%.

The rupee strengthened by 47 paise against the dollar to close at 91.51, led by easing commodity prices, tighter fiscal discipline, comfortable foreign exchange reserves and likely corporate dollar inflows.

Stock-specific action is expected to remain in focus as the Q3 earnings season gathers momentum.

Key results due on Tuesday include Bajaj Finance, Adani Ports, Varun Beverages and Adani Enterprises.

On the macro front, markets will track the S&P Manufacturing PMI data later today, followed by US JOLTS job openings data tomorrow.

Looking ahead, Siddhartha Khemka of Motilal Oswal said near-term momentum could remain constructive, though global cues and earnings-related developments will continue to drive stock-specific moves.

Nagaraj Shetti of HDFC Securities added that Monday's sharp recovery could encourage bulls to attempt a comeback.

Technically, analysts flagged key levels to watch. The Nifty may face resistance around 25,200, followed by 25,400 in the near term, while immediate support is placed near 24,900.

Rupak De of LKP Securities cautioned that the broader trend remains weak despite the bounce, citing that as long as the index stays below the 200-day moving average, sentiment may remain negative and rallies could be used to pare leveraged long positions or build shorts.

Nilesh Jain of Centrum Broking said the rebound was largely driven by short covering from oversold levels, with immediate resistance seen near the 200-DMA around 25,210.

A decisive move above this level could signal a short-term trend reversal, while support is seen at 24,800, followed by 24,680.

Nandish Shah of HDFC Securities said the Nifty holding above the Budget-day low of 24,573 points to a possible short-term reversal, though a clear move above the positional resistance at 25,500 is needed to confirm a sustained bullish trend.