Market Bulls Rejoice
The financial markets experienced a seismic shift on February 3rd, largely fueled by the announcement of a favorable trade agreement between the United
States and India. This development acted as a powerful catalyst, eradicating previous hurdles for the bullish sentiment in both the Nifty 50 and the Bank Nifty indices. The immediate impact was a spectacular single-day rally, marking the most significant uptrend observed for the Nifty 50 since May 12, 2025. Complementing this surge, the Bank Nifty not only participated but also achieved a fresh all-time high, underscoring the broad-based positive sentiment. This remarkable performance was further supported by a noticeable cooling in the VIX (India Volatility Index), coupled with strengthening momentum indicators, all contributing to a robust upward trajectory for the markets. The clarity provided by the trade deal appears to have instilled significant confidence among investors, paving the way for potential further gains.
Nifty's Technical Landscape
Following the substantial gains, the Nifty 50 is now eyeing its previous record high of 26,373, a level that is anticipated to present a critical resistance point for any sustained upward movement. While the index did not manage to surpass this peak in the immediate aftermath, it concluded the session at a strong 25,728, its highest closing level since January 13th of the current year, representing a gain of 639 points or 2.55 percent. The daily chart formation revealed a significant red candle, indicative of profit-taking pressure as traders digested the news. However, the index found immediate support precisely at its 50-day Exponential Moving Average (EMA) of 25,640. Currently trading comfortably above all key moving averages, the Nifty exhibits a positive technical posture. Momentum indicators have aligned with the rally, with the Relative Strength Index (RSI) climbing to 53.72 and the Stochastic RSI displaying a positive crossover. Although the MACD has moved above its signal line, it has yet to cross the zero line, and its histogram has shown an uptrend for nearly a month, suggesting underlying strength.
Key Support and Resistance
Weekly options data provides crucial insights into the Nifty 50's future price action, indicating that the index might encounter its next significant resistance around the 26,000 mark, with a further hurdle at 26,500. These levels are identified by the concentration of maximum Call open interest. On the downside, immediate support is identified at 25,500, where a substantial amount of Put open interest has been observed. Experts suggest that until the Nifty decisively breaches its previous record high, range-bound trading is a probable scenario in the upcoming sessions, with the 25,600–25,500 zone acting as a critical support area. The market's reaction on February 3rd saw the Nifty open with a gap up, rallying over 1,200 points, but the inability to sustain all these gains until the closing bell points to profit-booking activity. The formation of a large red candle on the daily timeframe, despite the overall positive close, highlights this profit-taking, with support found at the 50-day EMA.
The Impact of Trade Deal
The announcement of a substantial reduction in tariff rates on Indian goods by US President Donald Trump, from 50 percent to 18 percent, marked a significant turning point after over a year of trade tensions. This development directly contributed to the robust bullish sentiment. Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, noted that the Nifty's closing higher and leaving an unfilled gap between 25,108 and 25,641 (a 533-point gap) signifies a crucial bullish breakout following a period of sharp downward correction. He elaborated that according to gap theory, an unfilled opening gap that persists over the next three to four sessions often indicates a bullish breakaway gap, typically forming in the midst of a sustained uptrend. Shetti reiterated that the underlying market trend remains positive, and as long as the Nifty sustains above 25,600, there is a heightened probability of it advancing towards the 26,000 and subsequently the 26,300 levels.
Bank Nifty's Ascent
The Bank Nifty showcased impressive strength, reaching an intraday high of 61,765 and posting a gain of over 3,100 points in a single session. However, it was unable to close above the upper Bollinger Bands or decisively hold above its previous record high of 60,437. This suggests that 60,437 will remain a key resistance level for the banking index. Until a sustained trading above this mark is achieved, the index may experience range-bound movements, with immediate support anticipated at 59,800 and 59,450. A positive technical aspect is the Bank Nifty's ability to hold above its falling support trendline, which had previously acted as resistance, indicating a shift in market dynamics. The index concluded the session at 60,041, up 1,422 points or 2.43 percent, forming a long bearish candle despite the gains, with an unfilled gap noted between 58,687 and 59,793.
Momentum and Future Outlook
Technical indicators for the Bank Nifty signal improving momentum, with the RSI entering a bullish crossover. Vatsal Bhuva, Technical Analyst at LKP Securities, highlighted that while Tuesday's move was largely driven by news and events, the subsequent trading sessions are crucial to confirm the sustainability of this breakout. He emphasized that if the index can maintain its position above its 20-day and 50-day moving averages in the coming sessions, its strength will be further validated. Immediate support is pegged at 59,800, with resistance expected near the 61,700 level. Meanwhile, India VIX, the market's fear gauge, continued its descent, dropping to 12.90, a decline of 7 percent, following an 8 percent drop in the previous session. This decreasing volatility offers greater comfort to market bulls, though a decisive fall below all key moving averages is needed for complete assurance.
