Trade Setup For Sept 19: Nifty Faces Hurdle At 25,500 After Half-A-Point Fed Cut

The NSE Nifty 50 faces hurdles at the 25,500 level as the equity market shifts focus towards the US Federal Reserve's 50 basis points interest cut, analysts said.

The Federal Open Market Committee lowered the rate for the first time in more than four years to 4.75-5% on Thursday. Dot plot of Fed officials' commentary now expects to lower rates by one percentage point by year-end.

On the downside, 25,280–25,300 serves as an immediate support base for Nifty, followed by the 21-double exponential moving average support, which is placed near 25,080 levels, said Hrishikesh Yedve, assistant vice president of technical and derivatives research at Asit C. Mehta Investment Intermediates Ltd.

As long as Nifty stays above 25,080, a buy-on-dips strategy is advisable, with the potential for the index to test 25,600 in the short term, he added.

According to Yedve, the index formed a "spinning top candle" on a daily scale near its all-time high, signalling some short-term hesitation. "Therefore, on the upside, 25,500 will act as an immediate hurdle for Nifty."

If the index sustains above 25,500, it could test the 25,600 levels, he added.

The equity market may witness profit booking if the Fed slashes the lending rate by only 25 basis points, said Siddhartha Khemka, head of research in wealth management at Motilal Oswal Financial Services Ltd. The rate cut announcement by the Fed is scheduled later on Wednesday.

"However, a 50 bps rate cut by the Fed could bring some cheer to market sentiments. Also, Fed commentary will be important as it will give clarity on the quantum and duration of the rate cut cycle," he said.

China's central bank and the Bank of England will also announce their rate decision on Thursday, which is expected to follow the Fed’s move, Khemka pointed out. "Hence, we expect the market to remain volatile in the near term with rate-sensitive sectors in focus."

Bank Nifty, which formed a strong bullish candle on a daily scale, will encounter short-term resistance near the psychological level of 53,000, Yedve said. If Bank Nifty sustains above this level, the rally could extend towards 53,500-53,800, he added.

"On the downside, 52,000 and 51,700 will serve as support points. Thus, a buy-on-dips strategy should be adopted in Bank Nifty for the short term," he noted.

The GIFT Nifty, an early indicator of the Nifty 50 Index’s performance in India, was up 72.5 or 0.29% at 25,427.5 as of 06:30 a.m.