Trade Setup for December 19: Can Nifty reverse recent slide and finish week higher

Indian equities remained under pressure for a fourth straight session, with the Nifty continuing to form lower highs and lower lows on the daily chart.

The index closed marginally below its 50 day moving average near 25,820, which is now seen as immediate resistance, followed by the 26,000 level.

Thursday's session was marked by sharp intraday volatility. After a gap down opening of around 54 points, the Nifty slipped further before staging a strong recovery of nearly 176 points.

The rebound, however, failed to sustain, with the index giving up gains in the second half and correcting about 132 points from the day’s high of 25,902.

The Nifty eventually ended almost flat, down just 3 points at 25,815, while the broader market closed largely in the red.

Overall price action indicated consolidation with a weak bias, pointing to the ongoing tussle between bulls and bears.

Among index heavyweights, Indigo, TCS and Max Healthcare led the gains, while Sun Pharma, Tata Steel and Power Grid weighed on the index.

Sectoral trends were mixed, with buying interest seen in information technology, consumer durables and realty, while media, auto and oil and gas stocks declined the most.

Broader markets also saw volatility but recovered from early losses to close modestly higher. The Nifty Midcap index rose 0.34% and the Nifty Smallcap 100 index gained 0.13%, although overall market sentiment remained cautious.

The Indian rupee strengthened for a second consecutive session, appreciating 14 paise to settle at 90.24 against the US dollar. The currency’s recovery was supported by steady corporate dollar inflows and easing global commodity prices, which improved the supply environment.

On the macro front, investors are awaiting interest rate decisions from the Bank of England and the European Central Bank, along with US retail inflation and jobless claims data later today. The Bank of Japan also begins its two day policy meeting, with markets expecting a rate hike from 0.5% to 0.75% on Friday.

Siddhartha Khemka of Motilal Oswal expects the market to consolidate in a range, tracking rupee dollar movement, foreign institutional investor flows and global macro cues.

Nagaraj Shetti of HDFC Securities said the short term trend remains choppy with a weak bias, with support seen around 25,700 to 25,650 and resistance at 25,900 to 25,950.

Nilesh Jain of Centrum Broking said that the recent correction and the Nifty testing support near 25,700 could allow for a pullback, but a sustained move above the 21 day moving average near 26,000 would be crucial for a meaningful recovery.

Rupak De of LKP Securities warned that a decisive break below 25,700 could trigger the next leg of correction, while resistance remains near 25,900.

Nandish Shah of HDFC Securities pointed out that the index has so far managed to hold above the 50 day exponential moving average at 25,767 and the previous swing low of 25,693. A clear close below these levels could accelerate selling pressure, while the 26,000 mark is likely to remain a strong hurdle on the upside.