Hello and welcome to end of August 2025!
Both Nifty and Bank Nifty had a volatile end to August. The month started rather flat with consolidation and flat moves in first 2 weeks of August. We were in low VIX territory so premiums were also not very high.
However, a lot changes on 17th August with Government announcing GST concession and lower slabs shooting markets up on 18th August with Nifty 300 point GAP UP Opening.
Howeverm inspite of having such a nice gap up NIFTY daily chart for 18th August ended in RED in a sort of DOJI format , triggering some doubts and suspension that it is not as rosy at it seems.
What followed was next 3 days of small green size candles but the strength was not visible. Bank Nifty on the other hand was not moving up which showed definitely weakness in this index.
What came next was a big fall on Friday 22nd August which showed the effect of tariffs and negative sentiments on DALAL STREET. This is fundamental research but we from technical analysis knew a bunch was getting formed on BNF chart (Daily) with RSI near 40.
And what followed was a dump next 4 days. Bank Nifty and Nifty ended weak and showed resemblance to the 12th November, 2024 and 13th November, 2024 freefall. People who had shorted PUTs had to pay the price as OTM options became ITM.
KEY LEARNINGS :- NEVER UNDERESTIMATE POWER OF BUNCH !! THIS IS SYSTEM IN ITSELF !! ALSO, BE CAREFUL IN TRADING IN LOW VIX ENVIRONMENT AS IT CAN SHOOT UP YOUR LOSSES IF YOU LOSE DISCIPLINE OR GO FOR AMBITIOUS TRADES IN LOW PREMIUM MARKET !!
As we head into September, we need to check if the market will bounce back or continue to stay weak.
SHARING QUOTE FROM A FUNDAMENTAL RESEARCH PAPER !!
Monthly View on Nifty
The Nifty, while outperforming Bank Nifty has had an up and down month. It fell in the first week, rallied in the next 2 and then again declined in the last week, making it difficult for one to call a clear-cut trend. While the uptrend is intact, we are not seeing any clear leadership from any one sector.
There has been rotation of sector buying that has softened the fall in the Nifty. One sector that has done well in the last month is Auto. However, for a more sustained rally, we will need to see a more broad-based participation of stocks from more than one sector.
The Nifty is not far away from the first key support range placed at 24300-24000 where we have key averages such as the 200 DMA, 50 WMA and 10 MMA. In a deeper correction the next support range is placed at 23700-23200 where the 20 MMA is also placed. Given the multiple supports in a narrow range, we are of the belief the Nifty will find a bottom soon and start to rally again.
The Nifty has a key resistance at 25000-25200. If it can close above this range, we believe it will negate the recent fall and resume its intermediate uptrend, and then we can assume it can rally back to the highs of July and beyond.
Monthly View on Nifty Bank Index
The Bank Nifty has had a very weak month and has now seen a steady decline for 2 months in a row. In the past 9 weeks, the Index has fallen on 7 weeks with the latest one being the sharpest fall. In the recent past we have maintained that the Bank Nifty is stronger than the Nifty; interestingly in the current dip the Bank Nifty has fallen more than the Nifty.
This could be attributed to the fact that in June end, the Bank Nifty closed at new highs and thus there were more long positions in Banking stocks which could have led to profit booking and long unwinding. However, we maintain that the longer-term structure remains in a buy and we maintain our strategy to use the correction to build long positions once again.
The Bank Nifty breached some key supports in the last month at 54900-54200 which has led to further declines in the last few trading sessions. However, we are reaching major supports in the form of the 200 DMA and the 10 MMA which are now placed at 53560. Further supports are at 53000-52665. Thus, we believe that the Bank Nifty should find support soon in the above-mentioned levels.
As the correction has been deeper than first expected, we expect every rally to find resistances. In the immediate term, the first target range is placed at 54900-55600. If we can cross and sustain above this range then the next resistance is placed at 56200.