The Indian equity markets witnessed a turbulent trading session on May 21, 2025, as the benchmark Nifty 50 index tumbled below the critical 24,850 level. This fall was marked by sustained selling pressure across sectors, indicating caution among investors amid a backdrop of global economic uncertainties and domestic macroeconomic challenges. Despite the bearish trend, expert market analyst Chandan Taparia, Head of Derivatives & Technicals at Motilal Oswal Financial Services, spotlighted select stocks such as ONGC and GAIL, which demonstrated promising technical setups suggesting potential buying opportunities even amid the volatility.
This detailed market outlook seeks to provide investors and traders with a comprehensive understanding of the current market dynamics, technical nuances of the Nifty and Bank Nifty indices, and an insightful perspective on Taparia’s recommended stock picks for the day. The blog will unfold the underlying reasons for the Nifty’s decline, the technical charts’ implications, and the specific attributes that make ONGC and GAIL attractive buys, alongside a cautious outlook on other stocks like Muthoot Finance.
The Nifty 50 Index Faces Downside Pressure
On the morning of May 21, the Nifty 50 opened on a cautious note, holding near the psychologically important 25,000 mark. Initially, there was optimism as the index attempted to climb higher, but sellers quickly took control, exerting pressure on prices. By the end of the trading day, the index had slid sharply by more than 260 points, closing just below 24,850.
The technical charts paint a clear picture of hesitation and a weakening trend. The formation of a bearish candlestick on the daily chart indicates a dominance of sellers, signaling that the market may not sustain any near-term recovery unless it manages to reclaim higher levels. The 24,850 mark, which was briefly tested, has become a critical pivot point. Failure to hold above this level could open the door to further declines, potentially dragging the index down to 24,550 and even towards the 24,444 support level.
The trading volume during the decline was notably higher than average, which underlines the conviction behind the selling pressure. Institutional investors, who often influence significant market movements, appeared to be cautious or reducing exposure, contributing to the downward momentum.
Option Market Insights: Mapping the Trading Range
A unique lens to view market sentiment comes from the options market. Open Interest (OI) data in options provide clues about where traders expect the market to move and where significant resistance and support zones lie.
On May 21, the options data suggested a broader trading range for the Nifty between 24,300 and 25,200. Within this, the immediate focus was narrowed to 24,500-24,900, which implies that traders anticipate price oscillations within these bands.
Maximum Call Open Interest, or the highest number of outstanding call option contracts, was recorded at the 25,000 and 25,100 strike prices. This suggests that many traders view these levels as resistance, where they expect the market to face selling pressure.
On the other hand, Maximum Put Open Interest was concentrated at 24,000 and 24,500 strikes. This accumulation hints at strong support zones, where traders expect buyers to step in and prevent the market from falling further.
This mixed sentiment highlights the cautiousness prevailing among market participants who are balancing between profit booking and new buying interest, awaiting clearer directional cues.
Bank Nifty: Caught in a Range Amid Uncertainty
Parallel to the Nifty’s struggle, the Bank Nifty index also endured a day marked by volatility and hesitation. Opening nearly flat near 55,555, the index failed to gather momentum to breach this resistance zone. Instead, it gradually drifted lower, eventually settling near 54,800 by the close—a loss of over 500 points.
The technical picture on the Bank Nifty’s daily chart mirrors the caution seen in the Nifty. A bearish candle formation combined with the index hovering close to its 20-day Exponential Moving Average (DEMA) reflects uncertainty about the immediate trend direction. The 20-day DEMA is a critical technical indicator used by traders to gauge short-term momentum. The Bank Nifty’s proximity to this line suggests it is at a crossroads; a break above the 55,000 mark could ignite a relief rally targeting 55,250 and 55,555, but failure to hold these levels risks further declines to support at 54,500 and potentially 54,250.
The Bank Nifty’s wide trading range points to traders’ hesitancy in committing heavily to the banking sector, which has been influenced by both domestic lending concerns and global financial market pressures.
Chandan Taparia’s Stock Picks: Identifying Opportunities in Volatile Markets
Even amidst a bearish market environment, skillful traders like Chandan Taparia identify pockets of strength where strategic buying can deliver attractive returns. Taparia’s focus on select stocks is grounded in thorough technical analysis, volume patterns, and momentum indicators, enabling him to recommend actionable trades with defined risk-reward parameters.
ONGC: A Potential Breakout Candidate
Oil and Natural Gas Corporation (ONGC) emerged as a standout pick in Taparia’s analysis for May 21. The stock has recently broken out from a prolonged downtrend defined by a falling supply trendline on its daily chart, a technical breakout that often signals a change in momentum from bearish to bullish.
The breakout was confirmed by a spike in traded volumes surpassing the 20-day average, signifying strong buying interest. Volume plays a vital role in validating chart patterns; without accompanying volume, breakouts tend to lack conviction and may fail.
Additionally, the Moving Average Convergence Divergence (MACD) indicator—a momentum oscillator used widely by traders—has started to rise, signaling increasing bullish momentum. The MACD crossover typically suggests that the stock is gaining strength, adding further credence to a buy call.
Taparia recommends initiating a long position in ONGC at the current market price of ₹249, with a target price of ₹262. A prudent stop-loss at ₹242 is advised to limit downside risk in case the breakout fails or the broader market pressures overwhelm the stock.
GAIL: Solid Support and Reversal in Momentum
Gas Authority of India Limited (GAIL) also caught Taparia’s attention as a stock poised for gains. The recent price action shows a strong rebound from crucial support zones, specifically around its 50-day Exponential Moving Average (DEMA), which acts as a significant technical floor for the stock.
The buying on dips into this support area indicates the presence of demand and investor confidence at these levels. The Stochastic oscillator, another popular momentum indicator, has recently exited oversold territory, confirming a positive shift in momentum.
These technical signs point to GAIL having good potential to rally further, making it an attractive buy. Taparia suggests buying at the current market price of ₹191, aiming for a target price of ₹204. As always, a stop-loss of ₹186 is recommended to protect capital in case of adverse price movement.
Muthoot Finance: A Short Opportunity Amid Weakness
Contrary to the bullish stance on ONGC and GAIL, Taparia signals caution on Muthoot Finance. The stock has shown a bearish breakout, characterized by a strong marubozu candlestick, indicating sellers’ dominance.
The Relative Strength Index (RSI), a momentum indicator that measures speed and change of price movements, is falling, reinforcing the bearish momentum. This suggests that selling pressure is likely to continue.
Taparia advises selling the 29th May Futures contract of Muthoot Finance around ₹2,033, targeting a downside of ₹1,901 with a stop-loss set at ₹2,110. Such trades allow investors to potentially profit in declining markets, but they require careful monitoring and discipline.
Broader Market Context: Why is the Nifty Falling?
Understanding the backdrop against which these technical patterns are unfolding is critical for investors seeking to grasp the bigger picture.
Globally, markets have been jittery amid concerns about tightening monetary policies by major central banks, persistent inflationary pressures, and geopolitical uncertainties. These macro factors tend to influence investor sentiment heavily, leading to risk-off behavior where investors prefer safer assets or reduce exposure to equities.
Domestically, India’s economic data has been mixed. While industrial output and service sector activities have shown resilience, inflationary trends and crude oil price fluctuations continue to pose challenges. Additionally, the upcoming corporate earnings season has injected uncertainty, with market participants cautiously positioning themselves ahead of quarterly results.
These factors collectively contribute to the current bearish tone in the markets, reflected in the Nifty’s technical weakness and the cautious option market positioning.
What Should Investors Do Now?
Given the current market scenario characterized by volatility and mixed signals, investors need to adopt a strategic approach. Chandan Taparia’s stock-specific recommendations offer valuable guidance on actionable opportunities with clear entry, target, and stop-loss levels.
- Selective Buying: Stocks like ONGC and GAIL showcase technical strength despite broader weakness. Investors looking for medium-term exposure may consider accumulating these shares within recommended price bands.
- Risk Management: Setting stop-loss levels is crucial to safeguard investments against sudden reversals, especially in volatile markets.
- Watching Key Levels: Tracking the Nifty’s critical support and resistance zones (24,850 on the downside and 25,000-25,100 on the upside) will help investors time entries and exits more effectively.
- Cautious Shorting: For traders comfortable with derivatives, shorting overextended stocks like Muthoot Finance futures offers potential profit avenues, but such strategies require vigilance.
Final Thoughts
The market outlook for May 21, 2025, reflects a cautious mood among investors, shaped by both technical weakness in key indices and macroeconomic uncertainties. However, expert insights from Chandan Taparia highlight that even in challenging times, there are well-identified opportunities in fundamentally and technically sound stocks like ONGC and GAIL.
For market participants, the day underscores the importance of combining technical analysis with an understanding of broader economic factors to make informed decisions. Employing disciplined risk management and remaining alert to market developments can help investors navigate the current landscape successfully.
As the markets evolve, staying updated with timely analyses and maintaining a balanced portfolio approach will be key to achieving investment goals.