Trade Setup for April 2: Nifty sees a relief rally but 23,000 remains a barrier

After Monday's brutal sell-off, the Nifty staged a relief rally, rising 348 points to close at 22,679.

The index opened with a sharp 568-point gap-up at 22,899 amid optimism that the ongoing war, which has rattled global markets and disrupted energy supplies, may be nearing a resolution.

While the Nifty touched an intraday high of 22,941, it gave up over 300 points from the peak, ending well off the day's highs.

Among gainers, Trent, IndiGo, and Adani Ports led the rally, while Dr Reddy's, Cipla, and HDFC Life came under pressure and closed as top losers.

Sectorally, all indices ended higher except pharma and healthcare, with PSU banks, media, and metals leading the gains.

Broader markets outperformed, with the Nifty Midcap 100 and Smallcap 100 rising 2.2% and 3.3%, respectively.

Going ahead, the sustainability of this recovery will depend on progress in de-escalation of the West Asia conflict. While improving sentiment has supported the bounce, markets are likely to remain sensitive to further developments.

A sustained easing of geopolitical tensions, along with stability in crude prices, currency trends, and institutional flows, will be key to determining the strength of the recovery.

According to Nandish Shah of HDFC Securities, this marks the fifth pullback attempt since the conflict began, following four failed rebounds. He sees key support at 22,283, with resistance near 23,000.

Dhupesh Dhameja of SAMCO Securities said that the -index held the 22,500-22,450 support zone and moved towards 22,800-22,950, where selling pressure re-emerged.

He added that Nifty continues to trade below its falling short-term moving averages, indicating that the broader trend remains weak.

Overall, the rebound appears corrective within a broader downtrend. Unless the index reclaims the 23,000-23,200 zone, rallies are likely to face resistance, keeping a sell-on-rise strategy intact amid heightened volatility.

Rupak De of LKP Securities said that while the broader trend remains weak, the index's proximity to key support and signs of RSI divergence indicate early recovery signals.

Immediate resistance is seen at 22,800; a move above this could push the index towards 23,000 and higher. On the downside, a break below 22,200 may revive bearish momentum.