Investors are closely monitoring the banking sector as it holds the key to the next directional move for the Nifty. After several sectors have played their part, attention is now squarely on banking to determine the trajectory of fresh momentum in the market.

Analysts indicate that a decisive break above 22,150 in Nifty and 47,000 in Bank Nifty could fuel a fresh wave of up move. On the other hand, 21,200-21,450 zone is expected to offer support in case profit-taking resumes. The sectoral preference remains on IT, metal, and pharma for long trades, while a cooling-off period is anticipated for others, notably the PSU pack, said Ajit Mishra of Religare Broking.

“While domestic markets witnessed lacklustre trading, a steady uptrend in US markets offers some comfort to investors. The Dow Jones Industrial Average (DJIA) approached the coveted 39,000 mark, indicating positive sentiment despite potential profit-taking,” Mishra said.

On the domestic front, India’s Services PMI surged to a six-month high of 61.8 in January 2023, driven by expansion in new business and increased demand from both external and domestic clients.

The Reserve Bank of India (RBI) opted to maintain its key policy rate unchanged at 6.5 per cent for the sixth consecutive time, stressing its commitment to balancing inflation control with economic growth support. Retail inflation in December 2023 rose to 5.7 per cent, driven by food price uncertainty, while CPI projections for FY24 and FY25 stand at 5.4 per cent and 4.5 per cent respectively. The GDP forecast for Q1FY25 has been revised upwards to 7.2 per cent, reflecting anticipated growth in the Indian economy.

The US economy kicked off the year with robust growth, as evidenced by the S&P Global Services PMI at 52.5 for January. Meanwhile, new orders saw a major increase, while the ISM services PMI surged to 53.4, indicating accelerated growth in the service sector as employment rebounded and new orders picked up.

In the Nifty, however, downward pressure persists from the psychological level at 22,000, with the next support identified at 21,650. On the upside, key hurdles lie at 22,000-22,100, said Arvinder Singh Nanda, senior vice president of Master Capital Services Ltd.

“For the Bank Nifty, major support is noted at 44,800, while hurdles are positioned at 46,000-46,200. Sustained movement above these levels could propel the index towards the 48,000 mark,” Nanda said.

As market participants navigate through this consolidation phase, a stock-specific approach with a preference for hedging remains prudent amidst the prevailing choppiness. With global economic optimism coupled with domestic resilience, investors are poised to adapt to potential shifts in market dynamics, experts added.