Bulls Stay in Control Even as Nifty Pauses After Sharp Rally
Indian equity markets entered a phase of healthy consolidation on December 23 after a strong two-day rally, but the broader technical setup continued to favour the bulls. The Nifty 50 closed flat with a positive bias, sustaining its uptrend for the third straight session, while volatility slipped further, reinforcing confidence among market participants.
Despite intraday swings, the benchmark index managed to hold well above its key support levels and all major moving averages, indicating that the recent pause is more of a breather than a trend reversal. The sharp fall in volatility, with India VIX hitting a fresh record closing low, further strengthened the bullish undertone.
Nifty Consolidates but Maintains Higher High–Higher Low Structure
The Nifty 50 opened above the crucial 26,200 mark but witnessed early profit booking, slipping to an intraday low of 26,119. However, the dip was swiftly bought into, with the index recovering losses within the first hour of trade. For the remainder of the session, the market moved within a narrow range before closing at 26,177, up 5 points.
Technically, the index formed a small bearish candle with minor upper and lower shadows, signalling indecision rather than weakness. Importantly, the index continued to form a higher high–higher low pattern for the third consecutive day, a classic sign of an intact uptrend.
“This market action indicates a breather-type formation after the recent sharp upmove, which could act as an uptrend continuation pattern,” said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.
Also Read : Sensex, Nifty Finish Rangebound With IT Stocks Pressuring Indices
Momentum Indicators Continue to Support the Bullish Case
Short-term momentum indicators remain supportive of further upside once consolidation ends.
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RSI climbed to 58.7 and stayed comfortably above the reference line
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Stochastic RSI maintained its upward trajectory with a bullish crossover
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MACD turned positive, with the histogram moving above the zero line
These indicators suggest that buying momentum is still intact, even as the market digests recent gains.
“The underlying trend of the Nifty remains positive. The market is expected to resume its uptrend after one or two sessions of consolidation,” Shetti said.
According to him, immediate support lies at 26,050, while the next upside levels to watch are 26,300–26,400.
Options Data Highlights 26,200 as a Crucial Near-Term Level
Derivatives data also points to 26,200 emerging as an immediate resistance zone for the Nifty, making it a critical level for directional clarity.
Key observations from monthly options data include:
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Maximum Call open interest at 27,000, followed by 26,200 and 26,000
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Heavy Call writing at 26,200, 26,600 and 26,700
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Maximum Put open interest at 26,000, followed by 26,200 and 25,500
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Strong Put writing at 26,200, 25,700 and 25,800
This positioning suggests that while traders are cautiously optimistic, a decisive move above 26,200 is needed to trigger the next leg of the rally. A breakout could open the path towards 26,600 and higher in the coming sessions.
Bank Nifty Pauses After Rally, Key Levels in Focus
The Bank Nifty underperformed slightly, snapping its two-day winning streak and ending the session marginally lower by 4.5 points at 59,300. The index closed just below the midline of the Bollinger Bands (59,320), a level that analysts see as crucial for further upside.
The daily chart showed a high-wave type bearish candle, characterised by long upper and lower shadows, indicating volatility and indecision after the recent rally. Despite this, the index continued to maintain its higher high–higher low structure and stayed above all key moving averages.
“The zone of 59,500–59,600 will act as a major hurdle. A sustainable move above this band could trigger a sharp rally towards 60,000, followed by 60,500 in the short term,” said Sudeep Shah, Head – Technical and Derivatives Research at SBI Securities.
On the downside, Shah identified 59,100–59,000 as an important support zone that needs to hold to keep the bullish structure intact.
India VIX at Record Low Signals Market Comfort
One of the strongest signals supporting the bullish narrative came from the volatility index. India VIX fell 3.07 percent to close at a record low of 9.38, reflecting growing comfort among investors.
So far in December, the volatility gauge has declined 19.28 percent, indicating reduced fear and lower expectations of sharp market swings in the near term. Historically, such low volatility environments tend to favour trend continuation rather than abrupt reversals.
What Should Investors Watch Next?
While near-term consolidation is likely to continue, the broader trend remains positive. Market participants should closely monitor:
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26,200 on the Nifty for a breakout or rejection
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59,600 on Bank Nifty for confirmation of renewed banking-led momentum
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Movements in India VIX, which remains a key sentiment indicator
For now, the structure suggests that dips are being used as buying opportunities rather than exit points.
As long as the Nifty holds above 26,000–26,050, the bulls remain firmly in control, and the odds continue to favour an eventual breakout towards 26,300–26,400 in the near term.
