Domestically, positive signals such as higher GST collections, strong retail sales during the festive season and progress in India-US trade talks provided some support. However, sentiment remained fragile due to mixed corporate earnings, a sharp decline in exports to the US and continued financial outflows.Globally, renewed concerns about high valuations of AI-related stocks led to profit booking in major markets, dampening overall risk appetite.
With this, analyst Sudeep ShahVice president and head of technical and derivatives research at SBI securitiesinteracted with ET Markets on the outlook for the Nifty and Bank Nifty as well as an index strategy for the week ahead. Below are the edited excerpts from his chat:
Nifty ended the third week with losses despite a good earnings season. What do you think is happening here?
The benchmark index Nifty had made a strong break in the Symmetrical Triangle in October. After the breakout, the index continued its upward trajectory, marching steadily towards its all-time high. However, despite the initial strength, it struggled to surpass the record peak, leading to a rapid onslaught of profit-taking. From the recent high of 26,104, Nifty fell nearly 800 points in just 10 trading sessions, reflecting short-term fatigue after a prolonged rally.
Interestingly, Friday’s session proved to be a crucial technical checkpoint. The index successfully retested the breakout zone, which also closely aligns with the 50-day exponential moving average (EMA), a level often seen as a key dynamic support in trend markets. The subsequent smart recovery from this confluence zone highlights the renewed buying interest and reinforces the strength of the broader uptrend.
Going forward, the 25,300–25,250 zone is expected to provide crucial support for the Nifty index. This region not only marks the recent retest of the breakout zone, but also aligns with the 50-day EMA, reinforcing its technical significance. On the upside, the 25,650–25,700 range is emerging as a crucial resistance. A sustained move above 25,700 could herald a new leg of the rally, potentially pushing the index towards 26,000, and ultimately 26,300 in the near term.
Traders and investors should keep a close eye on the price action around these levels, as a decisive breakout or collapse could set the tone for the next change in direction in the index.
What is your view now on the FII activity, and why is their conviction so high when it comes to sales?
The money market tends to follow momentum, and over the past year global equities have witnessed robust rallies in markets such as Korea, Taiwan and Vietnam, as well as developed economies such as the US, Japan and China. As these regions deliver exceptional returns, financial institutions have found more attractive opportunities abroad, leading to a relative reduction in their exposure to India.
Moreover, India has been left behind in the global AI and semiconductor boom, where economies such as Korea and Taiwan are dominant players. Higher valuations, subdued near-term returns and limited participation in emerging global growth themes have prompted financial institutions to limit their investments in India.
So far, FIIs have remained consistent sellers, selling shares worth Rs 2.55 lakh crore in the cash segment in 2025 – continuing their selling streak that started in 2021.
Do you see them becoming buyers soon?
From an FII point of view, India is one of many global allocation choices and not so much a standout destination. Nifty’s flat performance so far highlights its relative underperformance against global peers. Despite prolonged consolidation since last September, Indian equities remain expensive as they are more time-adjusted than price-adjusted, leaving valuations elevated compared to other emerging markets.
In essence, the recent outflows reflect a global realignment of portfolios – not a loss of confidence – as capital shifts to markets and sectors that exhibit stronger momentum and more attractive relative value.
Let’s talk about Bank Nifty. Technically, it formed indecisive candles for the last three weeks. What does this indicate?
The benchmark banking index, Bank Nifty, remains the star on Dalal Street, consistently outperforming the broader market in the past few months. Even in the past week, when the Nifty index fell by almost 1%, Bank Nifty managed to close in the green, increasing its relative strength and reaffirming its leadership within the market structure.
Notably, the Bank Nifty-to-Nifty ratio chart is at a 68-day high, reflecting strong relative momentum. The ratio continues to form higher highs and higher lows, a classic sign of sectoral dominance and continued buying interest in banking heavyweights.
From a technical perspective, the index remains well above its major moving averages, underscoring the prevailing bullish undertone. The daily RSI has once again crossed the 60 mark and is trending upward, indicating that momentum is gradually recovering after a brief consolidation phase.
Going forward, the 20-day EMA zone of 57,500–57,400 is likely to act as a key support base and cushion any short-term declines. On the other hand, the 58,200-58,300 zone stands out as a crucial resistance area. A decisive close above 58,300 could herald a new leg of the rally, potentially pushing the index towards 59,000 and further to 59,600 in the near term.
Overall, broader market sentiment is expected to remain resilient as long as Bank Nifty continues to defend its short-term support and maintain its leadership on the ratio chart, with banking stocks once again leading the way.
The key constituents, HDFC Bank and ICICI Bank, don’t seem to be helping either. What do you think is causing the pressure on these two heavyweights?
Post the results, both HDFC Bank and ICICI Bank witnessed profit bookings, with ICICI seeing sharper pressure. Moreover, SEBI’s recent announcement about changes in the composition of the Nifty Bank index has raised concerns about foreclosure and rebalancing.
Under the new rules, the combined weight of the three main components will be limited to 45% (from around 62%), which will be implemented in four tranches by March 2026. As of end-October 2025, HDFC Bank and ICICI Bank have a weightage of ~27.97% and ~23.01% respectively – well above the individual limit of 20%.
As a result, passive and index-tracking funds will have to reduce their positions in these banks to meet the revised limits, which will cause short-term selling pressure in both counters.
Which sectors do you think have had the best second quarter results so far and are these the sectors that investors and traders can take comfort in?*
On the sectoral front, indices such as Nifty Bank, Nifty Financial Services, Nifty Metal, Nifty PSU Bank, Nifty Oil & Gas and Nifty Capital Market have shown a strong recovery from their respective support zones, broadening the recovery and signaling potential sectoral leadership if the uptrend resumes.
On the other hand, Nifty Consumer Sustainable, Nifty FMCG, Nifty IT, Nifty India Tourism and Nifty Media are likely to continue their underperformance in the near term.
Finally, do you have any stock recommendations for our readers?
Technically, ABCAPITAL, M&M, SAIL, BSE, CDSL, BANKINDIA, UNIONBANK, BAJFINANCE, JINDALSTEL, TATASTEEL, MFSL, PAYTM, RADICO and UPL look good.
(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)
#interview #decline #points #days #Nifty #moves #Sudeep #Shah