Stronger-than-expected second-quarter earnings from major companies boosted market sentiment, further boosted by renewed optimism about potential India-US trade partnerships and easing tariff tensions between the US and China. Continued confidence from foreign investors also played a key role, with investments of over Rs 50,000 crore announced in India’s financial and banking sectors.
However, some caution emerged on the macroeconomic front as output from eight core industries slowed to 3% in September 2025, down from 6.5% in August. Meanwhile, the HSBC Flash India Composite Output Index fell to a five-month low of 59.9 in October, indicating a slight slowdown in private sector activity.
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:
What is the view on the markets, after all the optimism seen this week?
The Indian stock market has seen a remarkable rise in October, with the benchmark index Nifty posting an impressive rally of over 1,500 points from a low of 24,588 – all within just 15 trading sessions. This rapid upward move reflected strong bullish momentum, supported by festive optimism, robust domestic flows and improving global sentiment. During the Diwali week, Nifty came within striking distance of its all-time high, raising hopes of another breakout. However, the index failed to maintain momentum and suffered profit booking, suggesting investors may be turning cautious after the sharp run-up. This pause in momentum has led to the formation of a Shooting Star-like candlestick pattern on the weekly chart, a sign that the uptrend may be losing steam. The pattern suggests that bulls tried to push prices higher but encountered resistance. However, to signal a real reversal here, a confirmation candle – usually a bearish follow-through – is needed. The daily RSI had peaked at 72.69 and has since fallen to 67.19, currently in bearish mode, adding to the cautious tone.
Meanwhile, the market is also awaiting details on the India-US trade deal, which could be a major trigger for the next move. With technical indicators cooling and macro developments in focus, the next few sessions will be crucial in deciding whether this is just a pause or the start of a deeper correction.
Speaking of levels, the 25,550-25,500 zone will act as crucial support for the index as it is the confluence of the 13-day EMA level and the 38.2% Fibonacci retracement level of the recent upward rally (24,588-26,104). While positive, the 25,950-26,000 zone will be a crucial hurdle for the index. Any sustained move above the 26,000 level will lead to a sharp upward rally towards the 26,300 level.
This Diwali created a lot of cheer in the market. Do historical trends from Diwali to Diwali support this optimism? Where will you see Nifty next Diwali?
This Diwali has brought renewed optimism to the markets – and historical trends seem to justify the mood. Over the last nine years, Nifty has delivered an average Diwali-to-Diwali return of almost 14%, with gains in eight out of nine years. The average positive gain is a healthy 15.78%, reflecting the index’s strong momentum during the holiday season. With Nifty currently trading around 25,795, a similar bounce back trajectory could take it to the 29,500-30,000 zone by next Diwali. Sustained earnings growth, strong domestic liquidity and steady FII inflows could keep the uptrend intact – making next Diwali another good day for equity investors.
FIIs also became buyers. Is this likely to hold?
Although FIIs have turned buyers in recent sessions, it is still too early if they have well and truly arrived. Over the last three months, they have sold shares worth Rs 1.29 lakh crore, and despite being buyers in 9 out of 15 sessions this month, the net outflow is still Rs 866 crore. The long-short ratio in index futures has risen from 6% to 24%, indicating that a large part of the recent Nifty rally has come from short covering and not new long positions. The FIIs remain cautious and are monitoring developments surrounding the India-US trade deal and the Bihar elections in November. If confidence continues, they could return more decisively, sending markets higher.
What is your view on the India-US trade deal? Will a favorable deal result in a further rally?
Absolute. A favorable trade deal between India and the US could act as a strong catalyst for the markets, potentially triggering a sharp upward rally in the benchmark indices.
What is the current status of Bank Nifty?
The benchmark banking index, Bank Nifty, recorded a new record high on Thursday, reflecting strong sectoral momentum and investor confidence. However, the index failed to hold above the crucial 58,500 level and posted gains soon after, signaling a temporary shift in sentiment after the sharp rally.
This pullback led to the formation of a Shooting Star candlestick pattern on the weekly chart, a technical signal that often indicates trend exhaustion. The pattern suggests that bulls tried to push prices higher but encountered resistance, resulting in a possible pause or reversal of the uptrend.
In addition to the cautious tone, the daily RSI is also showing signs of weakness. After reaching a high of 76, the RSI has now given a bearish crossover and is currently trending lower, generally signaling a cooling of momentum and a possible consolidation phase.
With Bank Nifty at a critical juncture, traders will be closely watching for confirmatory signals in the coming sessions. Whether this is a temporary breather or the start of a broader correction will depend on the price action over the next few trading sessions.
Speaking of crucial levels, the 57,000-56,900 zone will be a key support for the index as the 38.2% Fibonacci retracement level from the recent upward rally is placed in that region. On the upside, the 58,200-58,300 zone will act as a crucial hurdle for the index. Any sustained move above the 58,300 level will lead to a sharp upward rally towards the 59,000 level, followed by 59,500 in the near term.
Are there sectors that look attractive?
From a technical perspective, several sectoral indices are showing signs of continued strength and are likely to outperform in the near term. Leading the pack are Nifty Metal, IT, CPSE, Realty and Oil & Gas, all of which have maintained bullish momentum, supported by favorable chart structures and strong relative strength. These sectors have shown resilience even during broader market lulls.
On the other hand, Nifty Media continues to lag and is likely to underperform in the near term. Weak price action and lack of buying interest have kept the index subdued, and technical indicators point to limited upside potential unless a strong reversal pattern emerges.
Are there stocks that are technically well placed?
Technically, Cummins India, Blue Star, Hindalco and Chola Finance 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)
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