Trade Setup for September 30: Lower highs and lows do not bode well for bulls ahead of Monthly expiry

It gave you expiry day feels, but it wasn't. Monday's trading session can be summed up through this sentence.

Tuesday will be the final trading day of the month, the quarter, as well as the September F&O series - A series that could easily be summarised in two halves. The first half, a stupendous 1,000-point rally on the Nifty 50, crossing every important hurdle on the upside, only to give up most of those gains in the second half.

The Nifty bulls would have breathed a sigh of relief when the GIFT Nifty indicated a significant gap-up on Monday, but that is where the good part ended. What could have potentially turned into an end to the six-day losing streak, turned out to be the seventh straight day of losses, as every intraday recovery, even one during the second half of the day, got swiftly sold into.

Two things will not please the bulls - One of course, is the fact that there was zero conviction at higher levels to hold on to the gains and move higher, and two, the lower highs and lower lows continued on the Nifty, despite the initial gap-up. Not only did the Nifty failed to cross Friday's high, but also broke below Friday's intraday low of 24,629. A minor 30-point recovery from the intraday low ensured that the close was at least above the mark of 24,600.

There is no doubt that the market is cautious. There are multiple triggers that it needs to react to in the second half of the week. The monetary policy of the Reserve Bank of India is one such trigger, auto sales is another, both being reported on Wednesday. The companies will begin to release their updates for the quarter gone by as well before heading into the earnings season with TCS on October 9.

However, with HUL giving out an update the way it did on Friday, there is a fear that this could percolate into its FMCG peers as well. Although the stock recovered from intraday lows on Monday, India's largest FMCG company continued to underperform, despite the positive sentiments surrounding the GST rationalisation.

It is interesting to see the degree of volatility witnessed by the Nifty, a 170-point drop from the highs of the day, and all of this, without any significant spike on the India Volatility Index, which continues to hover between 11 to 11.5 levels, despite heading into multiple heavy duty events.

Going into the monthly expiry, Monday's low of 24,604 becomes the first line of defence for the Nifty on the downside, while the intraday high of 24,791 will be an important level to track on the upside, before the Nifty heads to 24,850 levels. Analysts are of the view that till the Nifty does not close above 25,200, any recovery from lower levels should be utilised as a selling opportunity.

The Nifty Bank continues to remain the index to watch. It is this index that triggered the Nifty fall from the day's high on Monday and also saw a brief spike towards the close of trade to end with gains. The 54,500 level continues to remain an important level on the upside, and a move above that, could lead to a possible extension of that upmove. All eyes will also be on the banking sector updates going forward, which will be reported starting this week.

"Nifty is currently nearing an important support zone of around 24,500-24,400 levels (previous swing lows and 200-DEMA) and this area could be reached in the next few sessions. However, any sustainable move above the hurdle of 24800-24900 levels could confirm near term bottom reversal pattern," Nagaraj Shetti of HDFC Securities said.

Ajit Mishra of Religare Broking expects oversold positions to lead to some consolidation on the Nifty 50 index with a strong support placed between the 24,400 - 24,500 zones. Resistance on the upside is placed between 24,800 - 25,000. He advises stock-specific moves aligned with sectoral trends without aggressive positions.