Stock Market Outlook: Sensex, Nifty Under Pressure; Bearish Momentum Persists, Options Data Signals Breakdown!

Indian equity markets are bracing for a subdued and potentially volatile session on Thursday, as sentiment continues to deteriorate amid technical weakness and bearish signals from the derivatives market.

Stock Market Trading Setup for July 25

The benchmark Nifty 50 index closed at 25,062.10 on Wednesday, slipping 0.63%, while the Sensex also formed a bearish candle on daily charts, reflecting persistent selling pressure across the board. Broader markets were equally weak, with mid and small-cap indices losing between 0.58% and 1.09%, indicating that the downturn is not confined to large-cap names alone.

Early cues from the GIFT Nifty futures point to a gap-down opening, with the index trading 121 points lower at 24,974 as of 7:36 AM IST. This decline reinforces the bearish sentiment that has been building over the past several sessions.

Sensex, Nifty Prediction Today

Technical indicators on the Nifty suggest that the index is in a fragile state. On the daily chart, a Bearish Engulfing candlestick pattern has emerged, backed by above-average volumes, a clear sign of strong selling pressure at higher levels.

The index has also breached key short-term moving averages, including the 10-day and 20-day exponential moving averages (EMAs) and has remained stuck in the lower Bollinger Band for the past 10 sessions. This indicates sustained weakness and limited volatility expansion to the upside.

Intraday charts paint a similarly bleak picture, with a lower top formation now evident - a classic signal of a short-term downtrend. Sectorally, the pain was widespread. IT and Realty indices led the losses, while defensive pockets like Pharma and Healthcare managed to post modest gains, as investors rotated into relatively safer segments. This defensive shift suggests that traders are growing increasingly risk-averse amid the current market environment.

What Traders Can Expect From Stock Market Today? Check Technical Outlook

Derivatives data further supports the bearish outlook. On the Call side, the maximum open interest was seen at the 25,500 strike, with 91.36 lakh contracts outstanding, making it a formidable resistance level. The 25,200 and 25,400 strikes also saw heavy Call writing, indicating that traders expect the index to remain capped below these levels.

Specifically, the 25,200 strike added 44.52 lakh contracts, followed by 32.43 lakh and 29.4 lakh additions at the 25,100 and 25,300 strikes, respectively. There was minimal Call unwinding between the 24,300 and 25,800 bands, suggesting little expectation of upside from here.

On the Put side, the 25,000 strike holds the maximum open interest at 76.71 lakh contracts, which could offer near-term support. However, fresh Put writing at the 24,800, 24,600, and 24,500 strikes, coupled with Put unwinding at higher levels, implies a shifting base lower. The most significant Put additions were seen at the 24,800 strike with 20.89 lakh contracts, reinforcing it as a potential support zone, but only if the 25,000 level fails to hold.

Adding to the cautious sentiment, the Nifty's Put-Call Ratio (PCR) has dropped from 1.14 to 0.90, a notable decline that reflects increased Call writing and waning bullish confidence. A PCR below 1, especially approaching 0.7 or lower, is often considered a sign that traders are positioning for further downside.

Volatility, while still muted, has begun to show signs of life. The India VIX rose 1.97% to 10.72 after three straight sessions of decline. Though still in the lower zone historically, a rising VIX warns of the potential for sudden directional moves, especially in a market already struggling to find firm footing.

Disclaimer

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