Nifty Outlook For October 19: Factors remain in place for recovery to continue in truncated week

It has been a while since the Nifty bulls had two consecutive weeks of gains. Three months to be more specific. But the last six sessions have already seen the Nifty recover 900 points from 2026 lows, to levels above the mark of 23,000. A confluence of both global and local factors have been responsible for this and they continue to remain in place as well.

First, the AI meltdown continued on Wall Street on Friday night. It will be interesting to see whether that continues on to Asia on Monday and then turns out to be a blessing in disguise yet again for India's IT companies, who had their best week since 2008 during the week gone by.

The most important trigger for IT stocks this week will be results from Infosys, which only get reported on Friday, but otherwise, it has been a fairly decent quarter for the IT companies that have reported numbers so far, barring Persistent Systems, and the street has duly penalized it for that too.

Second, the Russia Sanctions Bill, which was passed in the US, which gave US President Donald Trump the authority to impose tariffs of up to 100% on any country doing business with Russia, has been put on the backburner, as Trump has waived off the sanctions for at least six months as they themselves have a diesel deal with Russia to honour. That, coupled with some potential volatility ahead of the midterm elections on Wall Street could drive some capital flows back to India-like Emerging Markets too. While the sanctions were not an immediate overhang, a waiver could definitely soothe some concerns for now.

Third, for an index that has underperformed considerably, the foreign investor flows could turn for the better, as they did on Friday, but sustaining them will be key. Outflows from outperforming markets like Korea, Taiwan, and even possibly the US could drive flows back to India as there are multiple options to chose from and the markets are not just one-theme driven as has been the case with Korea and Taiwan with the semiconductor theme that is currently unwinding.

While there are factors that lie in place for the recovery to continue, there are some concerns which cannot be ignored either.

First, the Nifty has rallied over 900 points in just six sessions, that could prompt some traders to book some profits at higher levels. 23,200 could prove to be that level of resistance going forward for Monday's trading session.

Second, crude oil prices saw a sharp jump overnight, with Brent crude ending close to the $110 a barrel mark. Hostilities in West Asia continue unabated and in case oil prices continue to rise, that is something the market will have to take note of and could be a potential negative. It will be interesting to see how that pans out on Monday when trading begins as the sanctions waiver had been announced over the weekend.

Third, the most important factor determining the market moves on Monday will be the Nifty Bank, as nearly every major bank there reported results on Saturday and will react to the same. It remains to be seen whether the street takes note of the healthy growth in their respective core incomes and improving asset quality, or whether they chose to ignore that and put the emphasis on the margin pressure they have faced.

A possible tussle between the bulls and the bears is likely on Monday and the fact that it will also be the weekly options expiry, considering Tuesday is a stock market holiday, will be an added phenomena as well.

"Nifty on the weekly chart formed a long bull candle with long lower shadow after two months of decisive down trend. Technically this signals a formation of bullish 'Morning Star' type candle pattern on the weekly chart. This is positive indication," noted Nagaraj Shetti of HDFC Securities. He expects any further upside from here to take the Nifty to 23,500 - 23,600 levels and any weakness from here to find support at the 22,800 mark.

Amol Athawale of Kotak Neo advises a buy-on-dips and sell-on-rallies strategy with downside support at 23,000 and 22,800 and upside barriers between 23,300 and 23,500 being the key levels. He expects traders to exit their long positions in case the index slips below the 22,800 mark on any potential weakness.

The Nifty Bank could well turn out to be the market moving index on Monday and all eyes will be on how the major banks, HDFC Bank, ICICI Bank, Axis Bank and Yes Bank react to their results that were reported on Saturday.

Sudeep Shah of SBI Securities expects the Nifty Bank to remain rangebound with 55,200 - 55,300 levels acting as an immediate support and a break below that range could drag the index down to 54,800 levels. On the upside though, 56,300 - 56,400 is a barrier and in case these levels are crossed, fresh buying could emerge and that could take the index back towards the 56,900 mark.

Om Mehra of SAMCO Securities sees key support for the Nifty Bank at the 55,500 mark, followed by 55,400, while on the upside, the 56,000 level remains the key followed by 56,200. In case these levels are crossed on the upside, the buying momentum could strengthen further in the index.