Domestic equity benchmarks finished in the green on Friday, supported by sustained buying in
financial stocks, although gains remained limited due to heavy profit booking in pharma and healthcare counters. The Nifty advanced 64.60 points, or 0.27%, to settle at 23,719.30, while the BSE Sensex climbed 231.99 points, or 0.31%, to close at 75,415.35.
Meanwhile, the volatility gauge India VIX ended at 17.91, up by 0.49% from the last closing.
Analyst Sudeep Shah, Vice President and Head of Technical & Derivatives Research at SBI Securities, interacted with ETMarkets regarding the outlook for the Nifty and Bank Nifty, as well as an index strategy for the upcoming week. The following are the edited excerpts from his chat:
Q: Nifty ended with WoW gains of 0.7% but for weeks it has traded in a small range. In the absence of any favourable trigger, do you expect the sideways trade to continue?
In line with our expectations, the benchmark index Nifty continued to trade within a narrow range of nearly 542 points during the week. The index ended the week near the 23700 mark with a marginal gain of 0.27% and formed a small-bodied candle with shadows on both sides on the weekly chart, reflecting indecisiveness among market participants and the absence of strong directional conviction. However, the real story lies beneath the surface, where multiple indicators are hinting at an important development ahead.
For the last eight trading sessions, the index has been oscillating within the 23860–23262 zone. Interestingly, during all these sessions, Nifty either opened with an upside gap or a downside gap, leaving very limited opportunities for short-term traders to capture meaningful intraday moves. Owing to this prolonged consolidation, the downward slope of the 20-day and 50-day EMAs has moderated considerably. In addition, the daily RSI has been hovering in the narrow band of 44–47 over the past seven sessions, highlighting the absence of momentum. The daily ADX, currently placed at 16.86, further indicates a lack of strength in either direction. But the bigger concern is not the index movement, it is what the broader market is quietly signaling underneath.
Most importantly, the broader market structure also reflects a similar picture, as a majority of sectors continue to remain stuck in sideways consolidation phases. At the same time, market breadth has weakened notably, with momentum largely restricted to only selective stocks while the broader participation remains muted. This narrowing participation often becomes the foundation for the market’s next meaningful directional move.
Going ahead, we believe the index is likely to maintain its sideways trajectory until a decisive breakout emerges from the current range. On the upside, the 23850–23900 zone is expected to act as a strong hurdle for the index. On the downside, the 23400–23350 zone is likely to provide immediate support. The next breakout from this tightening range could decide whether the market enters a fresh trending phase or slips into another round of volatility.
Q. What is your view on Bank Nifty? Do you think Bank Nifty can cross its critical resistance of 54500 zone?
The banking benchmark index, Bank Nifty, has relatively outperformed the frontline indices over the past week. It has established a base near the 61.8% Fibonacci retracement level of its recent up move (49955–57456) and has witnessed a mild pullback thereafter.
Despite this minor retracement, the index continues to trade below its key moving averages. However, the daily RSI indicates a sideways trend, as per the RSI range shift theory. Other momentum indicators and oscillators are also reflecting a similar lack of clear directional bias.
Going forward, the zone of 53200–53000 is expected to act as a strong support for the index. On the upside, the 20-day EMA zone of 54350–54500 will serve as a crucial resistance. A sustained move above the 54500 level could pave the way for further upside, with the index likely to test the 50-day EMA, currently placed at 55270.
Q: For markets to stage recovery, financials must start firing at some stage. Based on the earnings season, how would you rate their Q4 performance and which stocks will be watched by you? Within the Financial space, where should one focus?
Financials are likely to be a key driver for any meaningful market recovery. The Nifty Financial Services index is currently consolidating within a narrow range of 25628–24911 over the last nine trading sessions, indicating a pause in directional momentum.
The overall setup suggests a lack of strong triggers, as both moving averages and momentum indicators are pointing towards a sideways trend. This reflects a phase of consolidation where the sector is neither showing meaningful strength nor weakness in the near term.
Given the current structure, the index is expected to continue trading within this range in the short term. A decisive breakout on either side of this band will be crucial, as it will likely determine the next directional move and set the tone for broader market recovery.
Q: The IT sector has emerged as the top weekly performer with Nifty IT index gaining nearly 5%. Do you think this to be a short term phenomenon or are these signs of long term bets being made now after a deep correction?
The broader trend for the Nifty IT index continues to remain weak, as it is still forming a pattern of lower tops and lower bottoms, indicating an intact bearish structure. Additionally, the index is trading below its key moving averages, which further reinforces the negative undertone. That said, the index has witnessed a strong rebound over the past week and has outperformed the frontline indices, suggesting signs of a short-term pullback rather than a confirmed trend reversal.
Going ahead, if the index sustains above the 29600 level, it may see an extension of the ongoing pullback rally. However, on the downside, a breach below 28400 could lead to a resumption of the broader downtrend.
Q: Another important factor that is still not being discussed much is the impact of El Nino. Agriculture sector and rural incomes are both at stake now and will impact auto (mostly two-wheelers), consumer staples and discretionary and performance of agri stocks? What is your view on these indices?
The Nifty Auto index is currently trading in a sideways phase, indicating a lack of clear directional momentum. Going ahead, a breakdown below the 25900 level could trigger selling pressure, potentially dragging the index towards the 24800 mark in the short term.
Q: One of the things now being discussed at least in social media is that the domestic investors are the reason why FIIs are having it easy to sell Indian equities i.e. their investments through MFs is giving easy exits to foreign investors. What is your view on this?
The rise of domestic investors has certainly changed the structure of Indian markets, but saying SIP and mutual fund inflows are simply giving FIIs an easy exit is an oversimplification. What we are witnessing is actually a structural shift in market ownership. Persistent SIP inflows and strong DII buying have created a stable domestic liquidity base that can absorb FII selling without causing deep market damage. From 2021 until 2026 till date, DIIs invested over ₹22.20 lakh crore into equities, while FIIs were net sellers to the tune of ₹12.65 lakh crore.
However, this domestic strength has also reduced the market’s dependence on foreign capital. Earlier, heavy FII selling would trigger sharp corrections, but now DIIs cushion the fall. FIIs are largely reallocating capital based on global interest rates, valuations, and currency trends, not because retail investors are funding their exits. In fact, resilient domestic participation reflects growing financialization of Indian household savings, which is a long-term positive for Indian equities.
Q: Gland Pharma, Honeywell Automation and Tata Communications were among top gainers this week, while Jain Resources, Amber Enterprises and CE Info Systems have been big losers. What should investors do with them?
Gland Pharma gave a downward sloping trendline breakout on the daily chart and sharply moved higher thereafter. The breakout was supported by a strong rise in volumes. Rising ADX suggests strengthening bullish momentum. The zone of 2200–2150 is likely to act as an immediate support, and the stock is expected to move higher as long as it trades above this zone.
Honeywell Automation India has witnessed a pullback of nearly 27% from the lows of 28,860 made on 13th May. The RSI is in a rising mode, indicating strong bullish momentum. The DI lines have widened, with DI+ placed significantly above DI- in the ADX indicator, highlighting strong buyer presence. The zone of 33,150–33,050 is expected to act as a strong support, and the stock is likely to move higher as long as it holds above this zone.
Tata Communications gave a downward sloping trendline breakout and moved sharply higher. The RSI is in a rising mode, indicating strong bullish momentum. The stock has closed above the upper Bollinger Band over the last three trading sessions, a phenomenon often associated with strong trending moves. The zone of 1800–1750 is likely to act as a strong support, and the stock is expected to remain on the higher side as long as it trades above this zone.
Jain Irrigation Systems has corrected sharply by around 36% from the high of 594 made on 8th May. The stock is trading significantly below its short and long-term moving averages. The RSI has slipped below the 40 mark, indicating bearish momentum. As long as the stock remains below the 430–450 zone, the outlook is likely to stay bearish.
Amber Enterprises India has corrected nearly 18% from the high of 8,974 made on 7th May. The MACD line has slipped below the zero line, indicating bearish momentum. DI- is placed above DI+ in the ADX indicator, highlighting seller dominance. As long as the stock trades below the 7,800–7,850 zone, the trend is likely to remain weak.
CE Info Systems has slipped below key short and long-term moving averages. Rising ADX suggests strengthening bearish trend momentum. The RSI has slipped below the 40 mark, indicating weakness in price momentum. The zone of 950–1000 is expected to act as a strong resistance, and the stock is likely to remain bearish as long as it trades below this zone.
(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)
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