With this, analyst Sudeep Shah, vice president and head of technical and derivatives research at SBI Securities, interacted 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:
After a promising start to 2026, the indices gave away their gains this week, with Sensex losing over 1,000 points in just three days. Do you see this as a healthy consolidation or the start of a deeper correction below 26,000?
Last week, the benchmark index Nifty hit a new all-time high on Monday before reversing sharply to end the week with a steep correction of almost 2.5%, its sharpest weekly decline since September 2025. What’s even more striking is that the index opened with a gap down every day in the last four trading sessions, indicating continued selling pressure. Most of the damage manifested itself mainly in the last two sessions of the week, but was this just a setback or the start of something deeper?
This decline has technical significance as Nifty has now confirmed a neckline break of an Adam and Adam Double Top pattern. Adding to the concerns, the index has decisively fallen below its 20-day and 50-day EMA, with the 50-day EMA, a key support that has held four times since October 2025, finally giving way. The index is now hovering near the 100-day EMA, while momentum indicators have become visibly weak. The daily RSI has fallen below 40 for the first time since September 2025 and continues to fall, a combination that rarely goes unnoticed by market participants.
This evolving chart structure points to further bearish momentum in the short term. From a levels perspective, the 25,500 to 25,450 zone is emerging as immediate support, and any sustained break below 25,450 could open the door for a sharper decline towards 25,200 in the near term. On the upside, recovery attempts are likely to encounter stiff resistance in the 25,900 to 25,950 zone.
The caution is not just limited to the frontline index. Broader markets are also under pressure, with the Nifty Midcap 100 falling below its 20- and 50-day EMA, while the Nifty Smallcap 100 is trading below all its major moving averages. This broad-based weakness suggests that risk appetite is clearly waning, reinforcing the need for a defensive and selective approach in the short term.
The index is clearly struggling at higher levels, especially under the influence of heavyweights like Reliance and HDFC Bank. With these giants looking weak, what catalysts could push the market past the 26,300 resistance?
The Nifty’s struggles around 26,300 reflect weak participation from the heavyweights, but several catalysts could reignite a breakout. Improving corporate earnings in the third quarter and positive forecasts could strengthen valuations. Second, monetary tailwinds from accommodative RBI views and hopes of global rate cuts could boost liquidity and risk appetite. Third, renewed foreign institutional inflows driven by global risk sentiment would provide strong support. Fourth, easing geopolitical tensions could increase risk appetite and reduce flows to safe havens. Finally, the Union Budget, with market-friendly reforms or fiscal stimulus measures, could further boost sentiment and help overcome the resistance of 26,300 people.
Given the sudden spike in global volatility due to the Venezuela crisis and the China-Japan trade war, what is your strategy for savvy traders: stay cash rich or use this 1% dip to accumulate?
Given the current chart structure of both the frontline and broader market indices, staying cash rich would be the better strategy for the next few trading sessions.
Banking stocks were a big drag this week, with HDFC Bank leading the decline. How do you view the banking sector technically, and is the weakness in private banks a buying opportunity?
Last week, the benchmark banking index, Bank Nifty, managed to outperform the frontline indices despite falling almost 1.5%, compared to the sharper correction seen in broader markets. However, the weekly chart has sent a warning signal with the formation of a Dark Cloud Cover candlestick pattern, a classic indicator of a possible shift in sentiment from bullish to bearish.Adding to the cautious undertone, the index fell below the 20-day EMA, signaling near-term weakness. The momentum indicators are also becoming weak. The daily RSI has fallen below the nine-day average and both are trending downwards. The fast stochastic has fallen below the slow stochastic limit, which further reinforces the picture of limited upside potential in the short term.
Looking ahead, the 58,700 to 58,600 zone will act as a crucial support area as the recent swing low is located in this region. A sustained rise below 58,600 could accelerate the decline to 58,000, followed by 57,500 in the near term. On the upside, the 59,700 to 59,800 band will serve as a major hurdle, and only a decisive breakout above this zone can revive the bullish momentum.
We saw a huge 8% drop in Trent this week due to fears of increasing competition. Is the fast-growing retail story facing a reality check, or is this a knee-jerk reaction?
Trent’s slump this week reflects fundamental concerns. Shares fell nearly 9% after the company reported 17% revenue growth, well below management’s previously shared expectation of 25%. Concerns about declining consumer demand despite continued store expansion also weighed on sentiment. Additionally, increased competition from discount fashion players and muted same-store sales eroded confidence.
Technically, the stock has been moving in a lower-high-lower-low formation since its high of 8,345 on October 14, 2024. The stock has fallen almost 52% since then and is now trading below the major moving averages. The ADX has fallen below 20 and the RSI has entered bearish momentum, reinforcing the bearish stance.
With TCS kicking off its third quarter earnings season this week, the IT sector is back in the spotlight. Do you expect IT to outperform banking in January given rupee weakness and earnings expectations?
While IT takes center stage as TCS announces Q3 results, both IT and Bank Nifty appear well positioned to outperform in January. Rising ratio lines in their respective IT Nifty and Bank Nifty Nifty charts indicate improvement in relative strength against the benchmark.
Seasonality also supports IT. Over the past 21 years, the IT index ended January in the green 14 times. In the month leading up to the budget, the sector was the strongest performing sector, rising ninefold with an average gain of 6.23%.
Now that central bank policy is priced in, what’s the next big trigger?
Besides the Q3 earnings, clarity on the India-US trade deal, Union Budget announcements, FII flows, US interest rate expectations and easing geopolitical tensions will be key triggers.
FIIs have become net sellers again, repaying over Rs 3,000 crore in a single day this week. Is this a short-term warning or a long-term warning?
FIIs have withdrawn nearly Rs 1.84 lakh crore in the last six months, signaling subdued conviction amid trade slowdowns, a stronger US dollar and a weak rupee.
Which sectors could take the lead in the second half of January?
Defence, PSU banks, IT, auto, pharmaceutical, healthcare and financial services are showing relative strength and could perform better if follow-on purchases take place.
Also read | Mutual fund SIP exit ratio rises to 85% in December even as contributions hit a record Rs 30,002 crore
(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)
#interview #Nifty #cracks #high #start #deeper #fall #Sudeep #Shah #replies