The broader market was not spared either, as the Nifty Midcap100 dropped 2% and the Nifty Smallcap100 declined 2.6%, reflecting widespread investor caution.
IT stocks bore the brunt, plunging 9% on worries over a potential cutback in U.S. tech spending, while the Nifty Metal index sank 7.5%, weighed down by fears of escalating global trade tensions. Meanwhile, both the auto and pharma sectors recorded declines of 3% each.
With this, analyst Sudeep Shah, Deputy Vice President and Head of Technical & Derivatives Research at SBI Securities interacted with ET Markets and his outlook on Nifty and Bank Nifty for the upcoming week. Following are the edited excerpts from his chat:
Despite weak global cues and tariff-related jitters, the Indian market tried showing resilience and held key levels. However, today, there was a downturn. How do you now interpret the price action from an options market perspective—do you see a further downside?
Global markets were rattled this week as a wave of risk-off sentiment swept across equities, triggered by the imposition of reciprocal tariffs on the U.S. trade partners. The escalating trade tensions have reignited fears of a slowdown in global economic activity. As Wall Street tumbled and Asian indices followed suit, the ripple effect reached Indian shores, with the Nifty reacting sharply to the global sell-off. But beneath the headline noise, what are the charts really telling us?Recently, the benchmark index Nifty has failed to sustain above its prior swing high and thereafter started witnessing gradual selling pressure. From the recent high of 23,870, the index has tumbled by over 1,000 points in just 8 trading sessions. Along with this fall, the index has slipped below its short and long term moving averages, which is a sign of weakening momentum. Adding to the bearish sentiment, the daily RSI is trading below its 9-day average, and the fast stochastic has slipped below the slow stochastic line. Together, these signals point to a clear loss of bullish strength and suggest that bearish momentum is currently in play. Sector-wise, the broader market is also under pressure. Barring a few pockets like private banks, select financial services, and FMCG, most sectoral indices are trending lower. In light of this, a cautious approach is advisable over the next few sessions.
Nifty formed a bullish candle on Thursday after taking support at the 50-DEMA near 23,130. But today, it traded below 20 and 50 DEMA, what may be the next levels to watch out?
Talking about crucial levels, the zone of 22,400-22,350 will act as immediate support for the index. If the index slips below the 22,350 level, then we may witness a further correction upto the 21,900 level in the short term. While, on the upside, the 20-day EMA zone of 23,100-23,120 will act as a crucial hurdle for the index.
For Bank Nifty, it seems to be at a crucial resistance. Do you see potential for a breakout, or may there be a risk of a double top? and how should traders approach it?
Bank Nifty has been consistently outperforming the frontline indices over the past few trading sessions. While the Nifty has declined over 2.50% this week, Bank Nifty has remained relatively resilient, shedding just 0.12%. Notably, the ratio chart of Bank Nifty versus Nifty has hit a 67-week high, signaling continued outperformance. The index is also holding firm above its short and long-term moving averages, with the daily RSI comfortably placed in bullish territory.
This overall chart structure suggests that bullish momentum remains intact for Bank Nifty. Talking about crucial levels, the zone of 52,000-52,100 will act as an immediate hurdle for the index. While, on the downside, the zone of 50,800-50,700 will act as a crucial support for the index. If the index slips below the 50,700 level, then we may witness a correction upto the 50,000 level.
The broader market outperformed on Thursday, with both Nifty Midcap 100 and Smallcap 100 closing in the green. However, this also reversed today. How do you read this?
The Nifty Midcap and Nifty Small Cap 100 were outperforming frontline indices till Thursday, but they both witnessed a gap-down opening on Friday and thereafter witnessed a sharp correction With this correction, they both have slipped below their 20 and 50 day EMA level. The momentum indicators and oscillators are also suggesting bearish momentum in the index. Hence, we believe they are likely to slide into the period of consolidation along with bearish bias for the next couple of trading sessions.
Are there any small or mid cap names that came in your observation for the traders to take positions?
We recommend avoiding the Mid and Small cap space for the next couple of trading sessions.
Pharma sector is under a lot of confusion due to the traiff scenario. What’s your take on the sector?
The pharma sector is currently facing a lot of uncertainty, largely due to the ongoing tariff scenario, which has created confusion. From a technical standpoint, the Nifty Pharma index witnessed a sharp decline on Friday, slipping below both its short and long-term moving averages. Momentum indicators are also signaling a bearish undertone, suggesting that the sector could remain under pressure in the near term. Until clarity emerges on the policy front, we recommend a cautious approach to this space.
Any opportunities there on the up or down side?
Technically, the stock of Marico is in a bullish trend. While metal stocks like Hindalco, VEDL, Jindal Steel, Tata Motors, KEI, and LTIM are in bearish trend.
IT and Auto remain under pressure due to U.S. slowdown fears and tariff impact. Do you see further downside risk in these sectors, and what’s the best bets play here?
Both the IT and Auto sectors are clearly feeling the heat from mounting concerns over a potential U.S. economic slowdown and the impact of the ongoing tariff developments. Technically, both sectors are in a firm downtrend, trading below their key short and long term moving averages. Momentum indicators further confirm the prevailing bearish sentiment.
Most notably, the Nifty IT index has witnessed a fresh breakdown, indicating the possibility of further downside in the near term. In light of these technical signals, we believe it is prudent to avoid fresh positions in both sectors for now and wait for signs of price stability or a trend reversal before considering any buying opportunities.
Any sectors you wish to bring into the limelight?
Technically, Nifty IT, Pharma, Healthcare, Automobile, Metal, Oil & Gas are in a strong downtrend.
While, Nifty Private Bank, Financial Services, and FMCG are relatively outperforming the frontline indices.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
