With this, analyst Sudeep Shah, Vice President and Head of Technical & 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:
With markets basking in Nifty’s all-time high, what are your thoughts on this?
The markets have turned a historic page as Nifty has breached the fourteen-month ceiling and hit a new all-time high. Not only that, it has achieved the highest weekly and monthly close ever, giving the bulls a reason to celebrate louder. The power wasn’t just limited to the benchmark; Nifty Bank, Nifty Private Bank, Nifty Financial Services, Nifty Auto and Nifty Infra all joined the record club, indicating that leadership sectors are still marching with confidence and determination.
However, beneath the celebration in the headlines, the broader market still seems hesitant. The Nifty Midcap 100 managed to hit a new all-time high, indicating continued institutional interest in high-quality midcap names. On the other hand, the Nifty Smallcap 100 fell for the second week in a row and remains below the 20, 50 and 100-day EMAs, highlighting selective participation and underlying caution in the smallest segment of the market.
The million-dollar question now is: will the broader market join the party? Given the current chart structure of broader indices, meaningful participation by small caps seems uncertain in the short term. The expectation is therefore that the rally will remain selective, with sector rotation and stock-specific measures continuing to support higher levels. Going forward, we think Nifty is likely to continue its upward trajectory and test 26,500 followed by 26,800 in the near term. On the other hand, the 20-day EMA zone of 25,950–25,900 is likely to provide a cushion in case of an immediate decline.
With the RBI MPC outcome around the corner, what are the short-term views on Bank Nifty?
Bank Nifty continues to dominate the market narrative with its exceptional outperformance. The index not only hit a new all-time high last week, but also closed in the green for the fourth week in a row, reinforcing the strength of the ongoing bullish trend in the banking industry. Technically, momentum remains robust. The RSI is firmly in the super-bullish zone across all key periods and continues to rise, indicating strong buying interest. On the weekly chart, Bank Nifty has managed to close above the upper Bollinger Band – a rare and strong indication of continued upward momentum. Other key indicators reflect this bullish stance, leaving little doubt about the prevailing force.
Going forward, the index looks set to extend its journey north, with immediate targets at 60,300, followed by 61,000 in the near term. On the other hand, the 58,800-58,700 zone, which aligns with the 20-day EMA, will serve as a critical support area in case of any pullback. Considering the technical chart structure is clearly in favor of the bulls, Bank Nifty is likely to remain the driving force behind the market’s upward trajectory.
Are there any banking sector stocks that look attractive?
Yes, some bank stocks look attractive at current levels. The Bank Nifty/Nifty ratio chart has shown a horizontal trendline break, indicating potential outperformance of Bank Nifty over Nifty. A rising ratio line and the 20-EMA acting as dynamic support add to the positive outlook. In the PSU banking space, most stocks have risen sharply and are trading near their highs, making the risk-reward ratio less favorable. However, one name from the PSU banking sector that can continue its journey north is Canara Bank. The stock continues to outperform its own index and shows continued relative strength. Among private banks, Federal Bank, AU Bank, Kotak Bank and HDFC Bank look promising. These stocks recently broke above their swing highs and have been trading sideways for the past two days, and any continued move above the recent highs could spark even more upside potential.
Despite all the optimism, financial institutions are still sellers of Indian equities. What do you think is the reason for this now? Why doesn’t trust return?
Foreign portfolio investors (FPIs) have remained net sellers in the Indian equity markets over an extended cycle. Historically, since 2015, FPIs have become net buyers in the secondary market in just two calendar years – 2019 and 2020.
Despite major indices delivering largely flat returns year-on-year, Indian equity valuations remain high. The continued rise in benchmark indices has lacked broad participation, with gains driven disproportionately by a handful of major index heavyweights, lifting the overall index to a lifetime high, while the underlying market remained relatively subdued.
For global investors, India represents one of many competing opportunities within the broader spectrum of international asset allocation. Meanwhile, India has clearly lagged behind in the semiconductor and advanced chip manufacturing race, with South Korea and Taiwan emerging as leaders in Asia’s technology-led momentum wave.
Traditionally momentum-driven allocators, FPIs are currently channeling capital into global markets benefiting from the AI and semiconductor theme as liquidity increasingly leans towards AI trading. With capital flows favoring momentum plays, short-term allocations reflect a clear tilt towards AI-related narratives as emerging markets join the ongoing technology cycle.
Do you think there are other factors that have yet to be priced in that could cause significant movement in our markets? Are there macro or micro factors?
Several macro and micro factors could impact Indian markets in the coming months. At the national level, growth momentum, favorable inflation trends and the possibility of a more accommodative RBI policy could support equities. Globally, rising Japanese bond yields and possible policy changes from the BoJ could tighten liquidity, while the Fed’s rate-cutting path will directly impact global risk appetite and capital flows. Moreover, progress on the India-US trade deal, a key overhang, could boost sentiment and benefit export-oriented sectors. Together, these factors could determine the near-term direction of the market.
Which sectors do you think you could bet on now?
Technical indicators suggest that several key sectors are likely to maintain their leadership in the near term. Nifty Private Bank, PSU Banks, Financial Services, Capital Market, Automobile, Infrastructure, IT and Pharma are showing strong bullish setups across multiple time frames supported by rising momentum indicators and favorable chart patterns. These sectors drove the recent rally and are expected to continue their outperformance in the near term.
On the other hand, some parts of the market may struggle to keep pace. Nifty Media, Realty, PSE, FMCG and India Defense are showing signs of weakness and are likely to remain under pressure, increasing their underperformance in the coming sessions.
Are there shares in that?
Technically, several stocks are showing strong development and look promising in the short term. Among them, Laurus Labs, LTIMindtree, Mahindra & Mahindra, Paytm (One 97 Communications), 360 ONE WAM, Adani Ports & SEZ, Cummins India, Escorts Kubota, Cholamandalam Investment & Finance (CHOLAFIN), Coforge and Housing & Urban Development Corporation (HUDCO) stand out with favorable chart structures and momentum indicators pointing to potential upside.
(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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