Trade Setup for July 3: Nifty falls to key support levels ahead of weekly expiry

The benchmark Nifty 50 index opened 47 points higher but soon came under selling pressure, falling 230 points from its early morning high of 25,608. After 2:45 pm, the Nifty recovered some losses but slipped below the 25,500 mark, with financials continuing to be a major drag.

The index eventually ended the session with a decline of 88 points, closing at 25,453.

Leading the charge among the top performers on the Nifty, demonstrating resilience, were Tata Steel, JSW Steel, and Asian Paints. Conversely, Shriram Finance, HDFC Life, and IndusInd Bank ended the session as major losers, facing the brunt of the selling.

The Nifty Midcap and Smallcap Indices witnessed profit booking along with the Benchmark where Nifty Midcap 100 fell marginally by 0.14% while Nifty Smallcap 100 registered a fall of 0.41%.

Amongst the sectoral indices, Nifty Metals, Consumer durables, and Healthcare gained the most, demonstrating pockets of strong buying interest. Conversely, Nifty Realty, Financial services and PSU Banks were the major losers.

Meanwhile, foreign investors were net sellers in the cash market on Tuesday, while domestic investors were net buyers.

In this ongoing correction phase, the previous swing highs of 25,317 and 25,222 could now act as immediate support levels. On the upside, the 25,640-25,740 zone continues to serve as a strong resistance band, limiting upward movement, according to Nandish Shah of HDFC Securities.

Following a nearly 5% rally in recent weeks, the Nifty has seen a mild pullback over the past few sessions, bringing it closer to the 38.2% Fibonacci retracement level of the prior upmove, around the 25,300 mark. On the hourly chart, the index has found initial support near its 50-hour moving average, noted Rupak De of LKP Securities.

"On the upside, immediate resistance is at 25,500. A sustained move above this level could pave the way for a short-term recovery, potentially pushing the index toward 25,600 or higher. Conversely, a decisive break below 25,300 may trigger a sharper correction," he added.

While global markets continue to show strength, the recent pause in the Nifty reflects growing investor caution, as participants await fresh triggers to resume the uptrend, said Ajit Mishra of Religare Broking.