Trade Setup for July 11: Nifty to see further pressure post TCS results?

After showing a decline with range-bound action in the previous session, the benchmark Nifty 50 index continued to exhibit weakness on Thursday, the weekly expiry day. The day began on a mildly positive note above the 25,500 mark, but the lack of follow-up buying led to immediate selling pressure.

After opening on a weak note, the market continued to slide gradually through most of the session. Minor intraday recoveries around the mid-part of the day faltered, and the Nifty eventually closed at the day’s low.

Market failed to hold opening gains as Nifty gave up the 25,400 mark, ending the day lower by 120 points.

Nearly 40 Nifty stocks ended in the red, with Bharti Airtel emerging as the top loser.

The broader markets also closed with cuts, although they came off their intraday lows.

Whether the Nifty 50 ends the week in the green or red now depends on how the Street reacts to Q1 results from India's largest IT services firm, TCS. Its performance may have a rub-off effect on other IT stocks, five of which are part of the Nifty 50 index.

IT stocks were largely in the red ahead of the results from both TCS and Tata Elxsi.

TCS' Q1 net profit and margins were ahead of Street estimates, though its revenue was a marginal miss. The IT major reported deal wins worth $9.4 billion during the quarter, lower than the $12.2 billion TCV it clocked in Q4 of the previous fiscal.

Besides TCS, stocks like IREDA and Tata Elxsi are also expected to react to their earnings, which were announced post-market hours on Thursday.

The Nifty is now approaching a crucial support zone between 25,300 and 25,200-levels aligned with the previous swing highs of the past month, as per the concept of change in polarity. A sharp bounce-back from these levels remains a possibility in the near term. Immediate resistance is seen at 25,550, based on the broader high-low range, according to Nagaraj Shetti of HDFC Securities.

Nifty has slipped below its congestion zone on the daily chart, reinforcing the prevailing bearish sentiment. The index has also moved below its 21-hour exponential moving average, and the RSI (14) has turned negative, signaling weakening momentum. In the short term, the trend remains weak, with downside support at 25,250-25,200 and resistance at 25,400-25,500.

Towards the end of June, Nifty had broken out of a six-week consolidation phase, but after an initial upmove, it has drifted into a time-wise correction. The earlier breakout zone near 25,250-25,200, coinciding with the 20-DEMA, has served as a reliable support. This area remains pivotal in the coming sessions.

Rajesh Bhosale of Angel One said that trend reversal moves tend to be sharp and swift. The current sluggish price action points more towards a time-wise correction than a structural breakdown. As such, the bias continues to favor the primary uptrend. A positive turnaround is likely if key supports hold. On the upside, 25,500 is the immediate resistance, while a decisive break above 25,600 would be required to trigger broader momentum and resume the upward trajectory.

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