Trade Setup for October 13: Nifty recovery may dampen amidst renewed US-China hostilities

The Nifty bulls went into the weekend as happy campers, with the index making a new high for the week and financials leading the charge. They would now be hoping that this is not short-lived after the latest US-China developments from Friday and over the weekend.

The Nifty 50 index gained 1.6% last week, its best in over three months. The index also made a weekly high of 25,330 in the process, registering its fifth weekly advance out of the last six. All of that will now be challenged in Monday's session.

US President Donald Trump announced on Friday that the US will be imposing another 100% tariffs on Chinese imports from November 1, as China has turned "hostile" recently and also added curbs on the export of critical software.

These announcements triggered a $2 trillion wipeout of US equities in a single trading session, along with a rout in crypto and other risk assets. US stocks wiped out all of their gains for the week in a single trading session.

While this move may not have a direct impact on India, considering the recent warm camaraderie shared by the leaders of both nations, there could be a sentiment impact if any.

Monday's session will also see a result reaction in Avenue Supermarts, while another IT major, HCLTech reports earnings after market hours. Anand Rathi Wealth will also be reporting results on Monday. The session is also important as it will mark the listing of India's largest IPO of 2025, Tata Capital, while it will be the last trading day for Tata Motors as a consolidated entity, ahead of the record date for the demerger of its commercial vehicles business. A day after its record date, the stock will trade ex-its CV business.

The Nifty Bank has been the outperformer of last week with another 2% gain. The index has gained in eight out of the last nine trading sessions, during which, it has risen over 3,500 points. As of Friday's closing, the index was just 1,000 points away from its all-time high. The 56,200 - 56,000 zone will be an important one to watch for the Nifty Bank going into Monday's trade, in case of any potential downside. On the upside, Friday's high of 56,760 is an important one to watch, as the index had cooled over 150 points from those levels before closing.

"The Bank Nifty index is likely to face significant resistance in the 56,800–57,000 range. Traders are advised to remain cautious, consider a buy on dips approach, and maintain strict stop-loss levels to manage risks effectively amid ongoing market volatility and potential price fluctuations," Hardik Matalia of Choice Broking said.

The Nifty had cooled off 50 points from the highs of the session before closing, but since the week had ended with healthy gains, nothing major was read into such a drop. The first major level on the downside will be the 25,250 - 25,150 zone, as Friday's intraday low was 25,156. 25,000 is still a fair distance away, but a potential gap down start could bring that level back in the spotlight as well.

Amol Athawale of Kotak Securities said that the 20-DMA of 25,000 will act as a key support zone for the Nifty. However, a fall below that level could make the current uptrend vulnerable and traders may want to exit their longs. On the upside, the next hurdle to watch will be the recent swing high of 25,448, above which, the index can even move to levels of 25,700.

The Nifty uptrend is maintained for now and the next level will be the September 18 high of 25,450, according to Nagaraj Shetti of HDFC Securities. The immediate downside support is at 25,150.

However, it must be noted that all of these remarks were made before Donald Trump's remarks.