Sensex dropped over 1,092 points to 74,776 while Nifty 50 crashed nearly 359 points to 23,547. This came as India VIX, which measures volatility in markets, jumped around 8% to 16.18. The sharp losses wiped off nearly Rs 6 lakh crore from the total market capitalisation of all companies listed on BSE, pulling it down to Rs 465 lakh crore.
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:
Nifty rollover for May expiry came in below both the three-month and six-month averages. Does this suggest traders are turning cautious near higher levels, or is it simply profit-booking after the recent recovery?
In the month of May, the benchmark index Nifty traded within a narrow range of 1219 points, marking its smallest monthly range since December 2025. The rollover in the May series also came below the prior month and 3-month average. Notably, a majority of the trading sessions during the month witnessed either an upside or downside gap at the opening, followed by range-bound price action throughout the day. As a result, opportunities for intraday and short-term traders remained limited despite the frequent gap openings. But what made this phase even more unusual was the message hidden within the broader monthly price structure.
On the monthly chart, Nifty has formed a bearish candle with shadows on either side, reflecting indecisiveness among market participants amid ongoing geopolitical uncertainties. Zooming into the final week of May, the index continued to trade within a narrow range for most of the week before witnessing a sharp decline during the final hour of Friday’s trading session, which tilted the balance in favour of the bears. While the market remained range-bound for most of the week, the late sell-off has raised an important question—was this merely profit booking or the beginning of a larger directional move?From a technical standpoint, Nifty continues to trade below all its key moving averages. More importantly, these moving averages have flattened out, indicating the absence of a strong trend. The daily RSI remains in a sideways zone as per the RSI Range Shift framework, while the daily Stochastic oscillator is also moving within a narrow band. Adding to this, the trend strength indicator, Daily ADX, is placed at near 15 level and continues to decline, suggesting a lack of directional momentum in the index. While these indicators point towards a lack of trend, Friday’s late sell-off has injected fresh uncertainty into the market setup.Talking about crucial levels, on the upside, the 20-day EMA zone of 23,750-23,800 is likely to act as an immediate hurdle for the index. On the downside, the zone of 23,300-23,250 remains a crucial support area. A breach below 23,250 could intensify selling pressure and open the doors for a decline towards the psychologically important 23,000 mark. With the index approaching key support levels, the market’s next move could set the tone for the coming weeks.
Bank Nifty rollover saw a sharper decline and futures data indicates short build-up despite price weakness. Are banking stocks likely to remain drags on the market in the June series?
In the month of May, the banking benchmark index Bank Nifty traded within a narrow range of 3,550 points, marking its tightest monthly range since January 2026. On the monthly timeframe, it has formed a High Wave candle, reflecting market indecisiveness.
During the past week, the index witnessed a strong upmove in the first half; however, it failed to sustain above the 55,500 level and subsequently underwent a sharp correction. This led to the formation of a bearish candle with a long upper shadow, indicating selling pressure at higher levels.
At present, the index is trading below its key moving averages, which are trending downward, suggesting a weak bias. The daily RSI remains in a sideways zone as per the RSI range shift rules, indicating lack of clear momentum.
Going ahead, the 53,500–53,400 zone is expected to act as an important support for the index. A breach below 53,400 could trigger further downside, with the next key support placed around 52,700. On the upside, the 50-day EMA zone of 55,300–55,200 is likely to act as a crucial hurdle.
FIIs reduced nearly 9,800 index shorts while also adding fresh longs. Do you see this as the beginning of a more constructive stance from foreign investors, or is positioning still defensive overall?
There were clear signs of short covering in Index futures between 21st May and 27th May, with FII net Index futures shorts reducing sharply from 2,31,190 contracts to 1,63,012 contracts. This also led to the long-short ratio improving from 11.80% to 16.14%, indicating a relatively constructive shift in positioning.
On Friday, massive short positions were built up leading to net index futures short contracts once again rising to 2,01,309 and the long short ratio dipping to 11.98%. Similar phases of short covering in the past were quickly followed by aggressive selling, causing bullish expectations to fade rapidly. This pattern has persisted for quite some time and is likely to continue until there is greater clarity on the US-Iran deal, a meaningful fall in the Dollar Index (DXY), stability in crude oil prices, and depreciation in the dollar against the rupee. Until these external factors stabilize, FII sentiment is likely to remain cautious rather than decisively bullish.
What are key levels to watch out for in June series? What triggers could push Nifty decisively beyond in either direction?
Talking about crucial levels, on the upside, the 20-day EMA zone of 23,750-23,800 is likely to act as an immediate hurdle for the index. On the downside, the zone of 23,300-23,250 remains a crucial support area. A breach below 23,250 could intensify selling pressure and open the doors for a decline towards the psychologically important 23,000 mark. With the index approaching key support levels, the market’s next move could set the tone for the coming weeks.
IT continues to trade near 52-week lows with elevated open interest and negative carry. Is the sector still witnessing aggressive short positions, and what would it take for sentiment to improve meaningfully?
The Nifty IT Index has rebounded nearly 8% from its 14th May low of 27,078. However, over the last seven sessions, the Index has remained range-bound between 29,747 and 28,678, indicating a lack of strong directional momentum. The RSI remains flat, while a subdued ADX reflects low volatility and absence of trend strength. Additionally, the MACD continues to trade below both the zero line and signal line, highlighting weak underlying momentum.
On the Relative Rotation Graph (RRG), the Index has shifted from the lagging to the improving quadrant, suggesting early signs of momentum recovery, though relative strength remains limited. The Index continues to trade below its 50, 100, and 200-day EMAs, keeping the near-term trend weak. The 29,900–30,000 zone remains a crucial resistance area, and a decisive breakout above this level could trigger a stronger pullback rally in the IT pack.
Given that the broader market structure remains range-bound with elevated volatility, should traders focus more on stock-specific opportunities rather than aggressive index directional bets in the June series?
With the broader market remaining range-bound amid elevated volatility, traders are likely to find better opportunities in stock-specific setups rather than aggressive directional bets on the Index in the June series. The rising ratio line in the Midcap and Smallcap indices relative to Nifty highlights continued outperformance in the broader market space.
Despite the strong bearish candle on 29th May, the overall market structure remains bullish, with no concrete signs of a major reversal yet. Currently, strength is visible in sectors such as private banks, PSU banks, financial services, and select midcap IT names. Meanwhile, the Index continues to react sharply to geopolitical developments, leading to frequent gap-ups and gap-downs that reduce trading clarity. In such an environment, strong price-action structures backed by robust technicals in trending sectors are likely to outperform across market conditions.
What stocks are you looking out for?
For the short term, Tamilnad Mercantile Bank, Nuvama Wealth Management, RR Kabel, Syrma SGS Technology, Krishna Institute of Medical Sciences (KIMS), and Minda Corporation are looking attractive based on their current market setup.
(Disclaimer: 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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