Nifty ended its two-week losing streak ending above the crucial 100-day moving average. Meanwhile, fear index India VIX has cooled-off sharply by 20% during the week to close near 12 and any further decline in volatility is expected to offer additional comfort to the bulls.

With this, 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 weekly gains of 1.4% led by the India-US trade deal managing to close just shy of 25,700. What do Nifty charts suggest for next week of action?

The past week proved to be a high-voltage one for the benchmark index, with Nifty navigating an environment of elevated volatility. The index swung within a massive 1,662-point range, marking its widest weekly movement since June 2024.

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On Union Budget day, Nifty slipped sharply to an intraday low of 24,571, weighed down by concerns over the increase in STT on F&O transactions. However, the weakness was short-lived. A sharp 1,770-point rebound followed as global risk sentiment improved after U.S. President Donald Trump announced an immediate reduction in reciprocal tariffs on Indian goods from 25% to 18%. This positive trigger propelled the index to an intraday high of 26,341, reviving hopes of a fresh all-time high.
That optimism, however, faded quickly. Within the very first minute of trade, Nifty witnessed a sharp 600-point intraday cut, reflecting aggressive profit booking amid heightened volatility. Despite supportive global cues, the index failed to decisively scale new highs, underscoring the fragile sentiment prevailing in the market.
In the latter half of the week, Nifty moved into a phase of sideways consolidation. Intense selling pressure in IT stocks capped broader market gains, as rising concerns around recent developments in artificial intelligence triggered apprehensions over the sector’s long-term growth outlook. Consequently, the Nifty IT index emerged as the worst-performing sector, ending the week with a sharp decline of 6.91%.
From a technical perspective, momentum indicators point towards consolidation, suggesting that the index may continue to oscillate within a defined range before a decisive directional move emerges.

Looking ahead, the 100-day EMA zone of 25,500–25,550 is expected to act as immediate support, followed by 25,200. On the upside, the 25,850–25,880 region will remain a critical resistance band. A sustained move above 25,880 could open the door for further upside toward 26,000, followed by 26,200 in the near term, setting the stage for another attempt at higher levels.

Q: February has traditionally been a week month but the start has so far been quite encouraging. What will be your advice to investors who have a positional view on the markets and would like to make trades based on this. Based on the seasonality data and post-budget trends, are there specific sectors which stand a higher chance to deliver gains for the investors?

Despite February being seasonally weak, post-Budget trends support a cautiously positive positional approach. In the week following the Budget, Sensex has closed positive 11 out of 15 times with an average gain of 2.10%, while Nifty has ended positive 12 times with an average gain of 2.04%.

From a 3-month perspective, both Sensex and Nifty have delivered positive returns 9 out of 15 times, with average gains of 6.77% and 7.40% respectively.

Sectorally, Pharma has been the strongest performer. In the week post Budget, Pharma has closed positive 14 out of 15 times with an average gain of 3.20% and a negligible average loss of just 0.24% in the lone negative instance. Over three months, Pharma has delivered positive returns 10 times with an average gain of 7.45%, while losses averaged only 1.90%.

Financial Services has also shown consistency, closing positive 11 times in the week post Budget with an average gain of 2.93%, while the 4 negative instances saw an average loss of 3.21%. From a 3-month view, Financial Services ended positive 9 times with an average gain of 10.85%, while losses averaged 8.81%.

Q. What is your view on Bank Nifty?

The banking benchmark index Bank Nifty registered a fresh all time high of 61764 on Tuesday, reflecting continued strength in the financial space. However, the index failed to hold on to higher levels, as profit booking emerged sharply in the latter half of the week. Despite this pullback, Bank Nifty ended the week on a strong note at 60120, delivering nearly 3% weekly gains and forming a bullish candle accompanied by a long upper shadow on the weekly chart — a sign of intraday volatility and selling pressure at elevated zones.

From a trend perspective, the index remains comfortably positioned above all its crucial moving averages, reaffirming the resilience of the medium term uptrend. That said, momentum indicators and oscillators have started to flatten out, signalling a likely consolidation phase or sideways movement as the market digests recent gains and awaits fresh triggers.

Looking ahead, the 20 day EMA placed between 59600-59500 is expected to act as the immediate and most important support zone for the index. Holding above this region will be critical for maintaining the current bullish structure. On the upside, the band of 60400–60500 continues to act as a strong supply zone. A decisive and sustained breakout above 60500 could reignite bullish momentum, paving the way for a swift rally towards 61200, and potentially extending further to 62000 in the short term.

Q: FIIs have remained net buyers this week while INR has also managed to deliver its best weekly closing in nearly three years. Do you expect these reversals to sustain for markets to benefit?

While FIIs have turned net buyers this week and the INR has posted its best weekly close in nearly three years, it is still premature to assume that the reversal will sustain. A major portion of the FII inflow came from a single large buying session after the India–US trade deal announcement, rather than a steady flow trend. On the currency front, the dollar index has eased marginally from its recent high of 92.19 recorded on 28th January, but it has largely moved in a narrow range over the last few sessions, indicating that the weakness is not yet decisive. A sustained dollar decline is typically needed to drive durable EM inflows.

Importantly, most key domestic triggers namely the India–US trade deal, Union Budget, RBI policy decision, and Q3 earnings season are already behind us, yet broad-based FII participation has not meaningfully returned. In addition, elevated FII index futures shorts have not seen expected unwinding.

For markets to build a stronger uptrend, consistent FII cash buying and visible short covering will be two crucial triggers, going forward.

Q: Tech stocks were worst hit this week with Nifty IT index falling more than 6%. How should one trade in this pack?

The Nifty IT index was among the worst performers this week, falling over 6%, largely triggered by renewed global concerns around AI-led disruption after Anthropic launched an advanced legal-focused AI tool. This development intensified fears that AI could increasingly replace or compress high-value software and consulting work, a risk not limited to Indian IT firms but also impacting US technology and software companies. The selloff reflects worries about future billing models, pricing power, and demand visibility across the global IT services space.

Technically, the setup has weakened further. The IT index is trading below its key short- and long-term moving averages and has confirmed a double-top neckline breakdown, with the measured downside target placed near the 35,050–35,000 zone. RSI has slipped below 40, indicating bearish momentum, and the MACD line has moved below the zero line. Unless the index reclaims and sustains above 36,000, weakness is likely to persist. Traders should avoid aggressive bottom fishing and look at rallies toward resistance as potential sell-on-rise opportunities until momentum stabilizes.

Q: Defence stocks struggled this week despite a largely positive budget for this sector. Where do you see opportunities?

Defence stocks underperformed this week despite a budget that was broadly supportive for the sector, mainly because price action continues to lack momentum. The Defence index has been moving in a wide 8,359–7,459 range since Budget day and, in fact, has remained largely range-bound since September last year with no sustained directional trend. The only phase of notable outperformance was during the post–Operation Sindoor rally from early April to late June 2025, after which most gains were retraced and momentum faded.

Technically, the 8,300–8,400 zone remains a strong resistance band. Only a decisive breakout above this area with volumes can revive buying interest at the index level. Until then, opportunities appear selective rather than broad-based. Among the pack, Data Patterns and MTAR Tech currently display relatively stronger price structures, while most other defence names continue to show weak or sideways setups. Traders may focus on stock-specific strength instead of the entire theme.

Apar Industries, Aarti Industries and Nykaa have shown relative strength this week, but the approach should remain level-based rather than chasing momentum. After the post-Budget gap-up, APARINDS has moved in a tight range, with 9,750–9,800 acting as a strong resistance; only a sustained breakout above this zone can trigger fresh move higher. AARTIIND has given a downward-sloping trendline breakout with a rising RSI, and the bullish bias holds as long as it sustains above 420–415 zone. Nykaa has given a volume-backed horizontal trendline breakout, with RSI rising and DI+ crossing DI-, indicating continued upside potential on follow-through.

On the laggard side, BDL and GRSE remain weak as the defence pack underperforms. Both trade below key short- and long-term moving averages. BDL has broken below the 1,305–1,300 swing low, while GRSE failed near 2,800 and slipped. Trend reversal is unlikely unless these resistance levels are reclaimed. Hindustan Copper has corrected about 24% after a parabolic rally and is now consolidating in a 658–555 band since last 7 sessions. Traders should wait for a decisive range breakout for fresh directional signals.

Q. Which Sectors you feel can outperform from here on & stocks within them?

From a technical perspective, several sectoral indices are showing signs of relative strength and are poised to outperform in the near term. Notably, the Nifty CPSE, Nifty PSE, Nifty Metal, and Nifty Oil & Gas indices are displaying sustained momentum, favourable price structures, and strong sector specific tailwinds. These indices continue to trade above key moving averages, and their short term indicators point toward continued outperformance as long as current trend supports hold.

On the contrary, pockets such as Nifty IT, Nifty Pharma, and Nifty Healthcare appear comparatively weaker on the charts.

(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)