Trade Setup for December 26: Nifty upside triggers limited but protecting important levels key

There was no Christmas cheer for Dalal Street as equity benchmark Nifty50 saw another session of consolidation on Wednesday, ahead of holidays in Indian and global markets. The index struggled to sustain levels above 26,200 through the day.

After a flat opening, early buying pushed Nifty to an intraday high of 26,235 within the first hour of trade. However, sentiment weakened after 10:30 am, with selling pressure dragging the index more than 100 points off its highs.

The session lacked any sharp selloff and instead remained largely range bound amid holiday thinned volumes. Still, the market failed to hold on to its opening gains and drifted lower through the day. Nifty finally ended the session near the day's low, closing down 35 points at 26,142.

IT stocks were among the key drags for the second straight session after the US modified its H 1B visa selection process. Shares of Wipro, Infosys and HCL Technologies remained under pressure in Wednesday's trade.

Trent, Shriram Finance and Apollo Hospital emerged as the Nifty's top outperformers. On the flip side, Indigo, Adani enterprise, and Dr Reddy witnessed selling pressure and ended as major laggards.

Baring Nifty Media, Realty and Metal, all the sectoral indices ended in the red. Amongst them, OIL/GAS, Pharma, and IT fell the most.

The broader market presented a mixed picture as Nifty Midcap 100 slipped 0.60%, while the Nifty Smallcap index bucked the trend with a 0.3% gain.

Following two days of consolidation, the Indian rupee depreciated 13 paise against the greenback, lagging its Asian peers on Wednesday. This decline was driven by a shift toward risk aversion, fueled by persistent capital withdrawals from foreign investors leading up to the holiday break, alongside heightened dollar demand from bullion importers.

On the macro front, investors are tracking the US jobless claims data, which was released later on Wednesday. US applications for jobless claims for the week ending December 20 fell by 10,000 to 214,000 from the previous week’s 224,000, the Labor Department reported Wednesday.

That's below the 232,000 new applications forecast of analysts surveyed by the data firm FactSet.

The weekly report was released a day early due to the Christmas holiday.

Indian equity markets will remain closed on Thursday on account of Christmas.

Overall, Siddhartha Khemka of Motilal Oswal expects Indian equities to remain range bound this week amid a lack of major triggers and reduced participation due to holiday closures across several global markets.

Nagaraj Shetti of HDFC Securities said the current lacklustre movement in the market could be short lived, with Nifty likely to stage a sharp rebound from lower levels in the near term.

He sees immediate support at the 26,000 mark, while resistance is placed around 26,300.

Despite profit booking at higher levels, the short term trend for Nifty remains positive, according to Nandish Shah of HDFC Securities. He said the 26,000 level is expected to act as near term support, while 26,240 is seen as immediate resistance, followed by 26,330.

Meanwhile, Bank Nifty has continued to trade below its upward sloping trendline since breaking down on December 17. Despite several intraday attempts to reclaim this key level, the index has consistently failed to close above it.

A meaningful directional move is unlikely unless Bank Nifty records a strong and decisive close above the trendline, said Sudeep Shah of SBI Securities.

He added that the 59,000 to 58,900 zone will act as immediate support. A sustained move below 58,900 could drag the index towards 58,600, followed by 58,300 in the short term. On the upside, the 59,500 to 59,600 zone is expected to act as a strong resistance.

CNBC-TV18 wishes its readers a Merry Christmas.