Continued foreign fund outflows and a sharp fall in the rupee weighed on market confidence. Consequently, the Nifty fell 139 points to close at 26,046, while the Sensex slipped 445 points to settle at 85,268.
With this, analyst Sudeep Shah, Vice President and Head of Technical & Derivatives Research at SBI Securities, interacted with ET Markets 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:
Despite Friday’s sharp recovery driven by the US Fed rate cut, Nifty still closed the week in the red. With the index consolidating after recent highs, what road do you see ahead?*
The benchmark index Nifty began December with strong momentum, hitting a fresh all-time high of 26,325 on the very first trading session. But what followed was something the market has now grown familiar with a controlled throwback. Since August, Nifty has displayed a very consistent pattern of shallow corrections, never falling more than 3.5%, and each correction lasting roughly 5 to 10 trading sessions. This disciplined behaviour has shaped the entire rally, leaving traders wondering whether the same script would play out once again.
In the most recent decline, the pattern repeated almost perfectly. The index corrected nearly 2.50% and the pullback lasted eight trading sessions, staying well within its historical rhythm. The 50-day EMA once again acted as a strong support zone, halting the fall and enabling the index to carve out a firm base. For the third consecutive week, the index formed a candle with a small body and a long lower shadow, which reinforces bullish intent at lower levels. But what this repeated behaviour signals about Nifty’s underlying strength becomes even more interesting from here.
At present, the index trades above its short and long-term moving averages, both of which have begun edging higher, often a precursor to renewed directional momentum. The daily RSI has also bounced sharply from the 44.50 zone and now quotes near 54.48, comfortably above its 9-day average. This alignment between trend and momentum begs a critical question: Is the index quietly preparing for its next breakout?
Going ahead, the zone of 26,150–26,200 stands out as the immediate resistance band for the index. A sustainable move above 26,200 could unlock a swift rally toward 26350, followed by 26,500 in the short term. On the other hand, the 50-day EMA region of 25,750–25,700 will act as a reliable support zone. With India VIX cooling off and the market stuck in a consolidation range, what is the best strategy for Nifty traders—buy on dips or sell on rise?
Considering the current chart structure, we recommend adopting the buy on dips strategy for now.
It has been a week since the RBI’s 25 bps rate cut. We saw a mixed reaction with private banks holding up, but PSU banks facing a ‘massacre’ earlier in the week. How does the banking sector look to you now?
PSU banks are currently witnessing healthy profit-booking after a stellar rally that began in late September. Such consolidation is normal and often follows a strong breakout, allowing the sector to digest gains before the next move. Earlier, PSU banks were leading the charge while private banks lagged. Now, with PSU names taking a breather, private banks are stepping up and helping keep the broader banking index steady.
This shift is also visible on the charts. The Nifty Private Bank/Nifty ratio has broken above a downward-sloping trendline, signalling improving relative strength in private banks. Even as the Nifty hovered around its 50-DEMA recently, Bank Nifty has outperformed and held firmly above its 20-DEMA, keeping its short-term trend intact.
As long as Bank Nifty sustains above the 59,000 level, the structure remains positive, and the index is well-placed to move higher.
Bank Nifty has managed to defend the crucial 59,000 support level and formed a Doji pattern this Friday. Given this backdrop, what is your technical view on the banking index?*
The banking benchmark index, Bank Nifty, lagged behind frontline indices last week, closing at 59,390 with a weekly loss of 0.66%. For the second consecutive week, the index formed a small-bodied candle with a long lower shadow, indicating buying interest at lower levels but a lack of strong bullish conviction.
Throughout the week, the index largely oscillated near its 20-day EMA, reflecting indecision and muted momentum. The daily RSI remains in a sideways zone, signalling consolidation rather than a clear trend.
Going ahead, the 59,700–59,800 zone will act as a crucial resistance. A sustained move above 59,800 could trigger a sharp upside rally toward 60,500, and if momentum persists, even 61,000 in the short term. On the downside, the 58,800–58,700 zone will serve as immediate support, and any breach below this level may invite further weakness.
Are there any favourite banking or NBFC names you are looking at, especially after the recent correction in the PSU space?
Among private lenders, Axis Bank and IDFC First Bank look well-positioned to do well. In both stocks, the RSI is rising and has stabilised around the 60 mark, indicating strengthening momentum. They also continue to trade above their key short- and long-term moving averages. Additionally, the MACD line is above both the signal line and the zero line, a sign of positive trend strength and sustained bullish momentum, suggesting that the upmove can continue.
In the NBFC space, Muthoot Finance and Chola Finance stand out as strong candidates. Muthoot Finance recently broke out of a three-day consolidation phase and closed firmly higher, while Chola Finance posted a strong rebound from its 20-DEMA. Both counters are trading comfortably above their important moving averages and are maintaining a higher-high, higher-low price structure. This keeps their trend decisively positive and positions them well for further upside.
With both the Fed and RBI outcomes now known, what will be the next big trigger for the markets? Will the focus shift to the domestic inflation data or any other global market cues?
With the Fed and RBI events behind us, the next major trigger for global equities will likely be the Bank of Japan’s policy decision. Markets are pricing in the possibility of a rate hike from the BOJ, and any move toward higher Japanese yields can spark carry trade unwinding. Since global investors often borrow in low-yielding yen to invest in higher-yielding markets like India, a rise in Japanese rates can force a reversal of these flows, creating volatility across emerging markets.
However, beyond global cues, the most closely watched development for Indian markets is the India–US trade deal. Progress on this agreement has been slower than expected, and the prolonged delay has kept market participants on edge. A favourable announcement could provide a strong sentiment boost, given the potential long-term benefits for both economies.
On the domestic front, the upcoming Q3 earnings season in January will be another important driver, offering clarity on corporate momentum heading into 2026. All of this will build up to the Union Budget on February 1, next year, the next major domestic event that could shape the market’s medium-term outlook.
If you were to summarise, do you think this market is currently for index traders, or should the focus strictly be on stock-picking given the sector-specific rotation?
Considering the current market environment, traders should focus on stock selection as we are witnessing sector-specific rotation over the last couple of trading sessions.
Metal stocks were clearly in the limelight on Friday due to hopes of a China fiscal boost. Which other sectors are looking strong to you right now?
The Nifty Metal index delivered a strong technical breakout, crossing the neckline of an Adam and Adam Double Bottom pattern on the daily chart. This bullish structure was further validated as the index surged above its key moving averages, signalling strength in the trend. Adding to the optimism, the daily RSI climbed above the 60 mark, reinforcing positive momentum. Based on the measured rule of the Double Bottom pattern, the upside target for Nifty Metal is placed at 10,870, indicating room for further gains in the short term.
Beyond metals, Nifty Private Bank, Financial Services, and Automobile sectors are expected to maintain their outperformance, supported by strong technical setups and improving sentiment. These sectors are likely to remain in focus for traders and investors looking for leadership in the current market phase.
Conversely, Nifty FMCG, Media, India Defence, CPSE, and PSE indices are likely to continue their underperformance.
Stocks like Tata Steel and L&T displayed significant strength during Friday’s session. Which other stocks would you say are displaying strength for fresh participation?
Tata Steel has staged a strong rebound from its 200-day EMA zone over the past three sessions, supported by renewed momentum in the metals space. L&T, meanwhile, broke out of its six-day consolidation range and managed to close higher despite intraday profit-booking. The stock continues to trade above all key moving averages, keeping its structure intact.
Are there any other sectors or stocks one should keep on their watchlist?
Currently, Metals, Autos, and Private Banks are the pockets showing notable relative strength versus the Nifty.
In the Auto space, stocks like Ashok Leyland, Maruti, and Motherson look strong. Their RSIs are in a rising mode and comfortably above 60, while prices remain well above key short and long-term moving averages, signalling sustained upside momentum.
In Metals, the renewed sectoral strength is reflected in Hindustan Copper, Hindustan Zinc, and Hindalco. Silver prices hitting record levels are aiding the rally in Hindustan Zinc. Hindalco has broken out of an 11-day consolidation and closed higher, while Hindustan Copper is trading well above its previous major resistance zone with momentum indicators supporting further gains.
From the Private banking space, Axis Bank and IDFC First Bank continue to stand out. Their RSIs are rising and the MACD line is well above the zero line, indicating strong underlying trend strength and positive momentum, both supportive of continued outperformance.
These are the stocks displaying strong setups for fresh participation.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
