Tariff-related uncertainty dominated market sentiment, curbing risk appetite and overshadowing otherwise range-bound trading in a truncated week. However, Fitch’s affirmation of India’s sovereign rating with a stable outlook, alongside industrial production’s (IIP) growth accelerates to a four-month high, helped limit the pace of decline midweek.
The BSE Sensex declined 270.92 points, or 0.34%, to finish at 79,809.65, while the NSE Nifty slipped 74.05 points, or 0.30%, to settle at 24,426.85.
With this, analyst Sudeep Shah, Vice President and Head of Technical & Derivatives Research at SBI Securities, interacted with ET Markets 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 wiped off all gains from the last week. Are we likely to enter a bear market?
In August, Nifty traded within a narrow range of 816 points — its lowest monthly range since March 2024 — despite heightened volatility. The index reflected a tug-of-war between supportive domestic cues and global headwinds. Sentiment improved mid-month after S&P upgraded India’s outlook and PM Modi announced GST reforms.However, this optimism was short-lived. In the final leg of the month, the Nifty reversed sharply, shedding more than 700 points in just six trading sessions. The decline was largely triggered by escalating tariff tensions between US and India.Finally, Nifty settled near the 24400 mark, posting a monthly decline of 1.38%. This marked the second consecutive month of negative returns, underscoring persistent selling pressure and the absence of follow-through buying. Technically, the index now trades below its 20-day, 50-day, and 100-day EMAs — all of which are trending downward, signalling weakening short to medium-term momentum. Adding to the caution, the daily RSI slipped below the 40 mark and it is in a falling mode, which is a bearish sign. Going ahead, the 200-day EMA zone of 24300–24250 has emerged as the key make-or-break level for Nifty. A sustained break below 24250 could accelerate the downside, potentially dragging the index toward 24000. On the upside, the resistance zone of 24650–24700 will be crucial; only a decisive move above this band could revive bullish sentiment and pave the way for a recovery.
The fall in the banking sector and the banking index is sharp. What are your thoughts on this? What is the outlook?
Bank Nifty experienced a sharp decline in August, shedding nearly 4% and forming a prominent bearish candle on the monthly chart. This downturn follows the emergence of a Dark Cloud Cover candlestick pattern in July, which has now been validated by the August correction, reinforcing the bearish sentiment on a broader time frame.
The index has been consistently underperforming the frontline indices over the past few weeks. This relative weakness is evident in the Bank Nifty vs Nifty ratio chart, which has slipped to a 100-day low—indicating sustained underperformance. After registering a swing high of 56156 recently, the index has corrected sharply by over 2400 points within just nine trading sessions, highlighting the intensity of the decline.
With this correction, it has slipped below its 20, 50, and 100-day EMA levels. These averages are started edging lower, which is a bearish sign. The daily RSI is in bearish territory, and it is in a falling mode. The daily MACD stays bearish as it is quoting below its zero line and signal line.
Going ahead, the 200-day EMA zone of 53600-53500 will act as immediate support for the index. Any sustainable move below the level of 53500 will lead to further correction upto the 52900, followed by 52400 in the short term. While, on the upside, the zone of 54500-54600 will act as an important hurdle for the index.
Let’s talk about rollovers. What is the data suggesting?
The Nifty futures ended the series with a marginal decline of 0.88%, reflecting the balance between early optimism and late-month headwinds. On the derivatives front, rollover of Nifty futures surged to 83.63% in August, not only higher than July’s 75.71% but also comfortably above the three-month average of 79.62%. Meanwhile, the rollover cost edged higher to 0.63%, exceeding the three-month average of 0.43%, suggesting participants were willing to pay a premium to carry forward their positions into the September series.
Bank Nifty Futures significantly underperformed the frontline indices. The index ended the August series with a steep loss of 3.44%, weighed down by persistent weakness in heavyweight banking stocks. From a derivatives perspective, the rollover jumped to 80.90%, up from July’s 77.98% and also above the three-month average of 78.21%. The rollover cost surged to 0.83%, higher than the three-month average of 0.42%.
Which sectors are looking good based on rollover data?
Potential Outperforming Sectors based on Roll-Over Data: Automobile, Consumer Durable, and FMCG.
Potential Underperforming Sectors based on Roll-Over Data: Private Banks, Financial Services, Defense, Oil & Gas, Media, PSE, CPSE, Capital Market, and Realty
Based on this, are you adding any stocks to your watchlist?
Yes, we’re closely tracking opportunities in the Automobile, FMCG, and Consumer Durables sectors. These segments are showing promising signs, especially in light of recent policy developments and improving domestic sentiment.
Let’s talk about our market mover, RIL. What is your view after its AGM and how do you technically read the stock?
Reliance Industries, a key index heavyweight, witnessed a breakdown from a 26-day consolidation phase on the day of its AGM. This breakdown was accompanied by strong volumes, lending credibility to the move. Additionally, the stock formed a bearish candle with a long upper shadow, indicating selling pressure at higher levels. Importantly, it has also breached its crucial 200-day EMA, further weakening its technical structure. Momentum indicators are aligning with this bearish setup, suggesting the potential for continued downside.
Hence, we believe, it is likely to continue its southward journey and test the level of 1290 in the short term. While on the upside, the 200-day EMA zone of 1390-1400 will act as an immediate hurdle for the stock.
Since the GST rate cut announcement, the FMCG pack has been doing very well. How can one capitalise on the theme and which stocks to pick?
Since the GST rate cut announcement, the FMCG sector has seen renewed investor interest, with several stocks showing strong momentum. However, the broader Nifty FMCG index has been trading within a horizontal channel for the past 38 trading sessions, indicating a phase of consolidation. This narrow range has led to a flattening of moving averages, and the daily RSI remains in a sideways zone, consistent with RSI range shift principles. Despite the index-level stagnation, select FMCG stocks have started to exhibit bullish trends, suggesting that stock-specific action is likely to dominate in the near term. Investors looking to capitalise on this theme should focus on individual outperformers rather than the entire pack.
Other than this, are there any sectors you are focusing on?
Technically, Automobile, Consumer Durable and FMCG are likely to outperform in the short term.
While Nifty Private Bank, CPSE, PSE, Defence, Financial Services, Oil & Gas, Capital Market, IT, Media, PSU Bank and Realty are likely to continue their underperformance in the short term.
Any stocks you are finding well placed within those sectors?
Technically, BRITANNIA, CGPOWER, DALBHARAT, SYRMA, LUAXTECH, CARTRADE, JAMNAAUTO and AVANTEL are looking good.
(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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