Meanwhile, the volatility gauge India VIX ended at 16.84, down by 1.32% from the last closing.
Analyst Sudeep Shah, Vice President and Head of Technical & Derivatives Research at SBI Securities, interacted with ETMarkets 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:
Q: What does the Nifty chart suggest for next week’s trade following an otherwise calm week with the index settling with WoW gains of 0.7% in the absence of any big surprise?
For the second consecutive week, the benchmark index Nifty continued to trade within a narrow range, forming another indecisive candle on the weekly chart. Over the last 11 trading sessions, the index has largely oscillated within the 24516–23797 zone, reflecting a lack of clear directional bias. The underperformance of heavyweight sectors such as IT and Banking, coupled with uncertainty surrounding the US-Iran conflict and persistent volatility in crude oil prices, has kept market participants cautious and indecisive. However, beneath this quiet index movement, a completely different trend is unfolding in the broader market.
The broader market continues to remain vibrant. Both midcap and smallcap indices are significantly outperforming the benchmark index. Most notably, the Nifty Midcap 100 touched a fresh all-time high on Friday, while the benchmark Nifty still trades nearly 8% below its record peak. Meanwhile, the Nifty Smallcap 100 index has climbed to a 10-month high. However, after the sharp outperformance witnessed in the broader market, we believe these segments could enter a phase of consolidation before resuming the next leg of the upward move. At the same time, the technical structure of Nifty itself is hinting that a major move may not be too far away.The Nifty index continues to display signs of indecision on the technical charts. One of the key observations on the daily timeframe is the visible Bollinger Band squeeze, indicating a sharp contraction in volatility. The Bollinger Band squeeze typically occurs when volatility declines and the bands narrow, often preceding a strong directional move on either side. Adding to this, most of the crucial moving averages are currently flattening out, while momentum indicators are also signaling a sideways trend. The only question now is — which side will break first, and where should traders keep a close watch?On the upside, the 24,450–24,500 zone is expected to act as an immediate hurdle for the index. On the downside, the 23850–23800 zone remains a crucial support area. The next breakout from this tightening range could potentially decide the market’s near-term direction.
Q: While India VIX fell over 7% during the week, it is still hovering around the 17 mark. What levels will make you comfortable to plan your trades?
India VIX has corrected sharply after touching the 28.90 mark and is now trading below its 20-day and 50-day EMAs, indicating a cooling-off in volatility. The current chart structure suggests that the market is not anticipating any major surge in volatility over the next few trading sessions, especially in the absence of fresh geopolitical triggers.
In the near term, the bias is likely to remain subdued; however, the 18.80–19 zone will act as a crucial threshold. A sustained move above this level would signal a potential spike in volatility, which could make the market more uncertain. From a trading perspective, lower VIX levels provide a relatively comfortable environment for planning trades, whereas a breakout above 19 would warrant caution due to the likelihood of increased market swings.
Q: Nifty Bank has been a cause of concern as far as the market sentiments are concerned and is down nearly 8% in three months. What is the outlook considering even earnings have failed to boost investor confidence?
The banking benchmark index has continued to underperform relative to the broader market. Although it witnessed a rebound on Wednesday, the index failed to sustain at higher levels, indicating selling pressure on rallies. On the weekly chart, it has formed a small-bodied candle with shadows on both sides, reflecting indecisiveness and a lack of clear direction.
Currently, the index is trading below all its key moving averages, which are themselves moving in a flat trajectory, suggesting a consolidation phase. The daily RSI has also been oscillating in a sideways range over the past 22 trading sessions, further highlighting the absence of strong momentum.
Going ahead, the 54,300–54,200 zone is expected to act as an important support. A decisive and sustained move below 54,200 could trigger further downside towards 53,500, followed by 53,000.
On the upside, the 50-day EMA zone of 56,000–56,100 will act as an immediate resistance. A sustained breakout above 56,100 may lead to a sharp upward move towards 56,600, and subsequently 57,200 in the short term.
Q: What is happening with two biggest stakeholders – HDFC Bank and ICICI Bank and do you see any pullback in them?
Both HDFC Bank and ICICI Bank continue to exhibit signs of technical weakness and remain under pressure. HDFC Bank has struggled to decisively move past its 20-day EMA, which continues to act as a dynamic resistance zone. Meanwhile, ICICI Bank has corrected nearly 9% after closing strongly above its 200-day EMA on April 21, indicating sustained profit booking at higher levels.
In addition, the private banking pack remains in the lagging quadrant on the Relative Rotation Graph (RRG), reflecting weak relative strength and deteriorating momentum compared to the broader market. The MACD line for both stocks is also placed well below the zero line, reinforcing the prevailing bearish bias.
From a technical standpoint, the 800–810 zone is likely to act as a strong resistance for HDFC Bank, while 1300–1310 remains a key hurdle for ICICI Bank. Unless these resistance zones are decisively breached with a visible improvement in relative strength and momentum, the probability of a meaningful pullback remains low.
Q: Auto was the outright performer this week as earnings have been supportive. What is your view of the sector and do have your favourites?
Nifty Auto had been consolidating within the 26,746–25,296 range since April 8 on the daily chart. The index witnessed a breakout on May 6, which was supported by a healthy follow-through move. The RSI is in a rising mode, indicating that momentum remains on the bullish side. Additionally, the rising MACD histogram bars, along with the MACD line sustaining above the zero line, further reinforce the positive bias.
On the Relative Rotation Graph (RRG), Nifty Auto has moved from the weakening quadrant to the leading quadrant, signalling that both relative strength and momentum have returned in favour of the index.
Among the stocks, Motherson, Bajaj Auto, Bharat Forge, and Mahindra & Mahindra are displaying positive price action setups and are likely to perform well in the short term.
Q: Realty stocks have also show a strong rebound for the past one month and it was among the top performing sector this week. What does the chart suggest about the outlook?
The Nifty Realty Index has witnessed a strong pullback of nearly 30% since its low of 639 recorded on April 2. Despite the momentum not being exceptionally strong, the index has managed to steadily inch higher, reflecting sustained buying interest at lower levels. The index is currently trading around 1% below its 200-day EMA.
On the Relative Rotation Graph (RRG), the index is placed in the leading quadrant. However, momentum appears to be concentrated in select stocks rather than across the broader realty pack.
From a technical standpoint, the 800–795 zone, which coincides with the 100-day EMA, is likely to act as a key support area. As long as the index sustains above this zone, the ongoing up move is likely to extend further.
Q: Firstsource, Godrej Industries and Tejas Networks were among top gainers this week, while Sapphire Foods, Oil India and Voltas have been big losers. What should investors do with them?
FSL had largely been consolidating within the 255–202 range on the daily chart since March 2. The stock witnessed a breakout on Friday, supported by a strong rise in volumes. The RSI has inched above the 60 mark, indicating healthy bullish momentum. As long as the stock sustains above the 255–250 zone, the pullback is likely to extend further.
GODREJIND has given a breakout from a downward-sloping trendline on the daily chart. The rising ADX indicates strengthening bullish trend momentum. Additionally, the DI lines have widened, with DI+ placed comfortably above DI- on the ADX indicator, signalling firm bullish control. As long as the stock trades above the 1075–1070 zone, the up move is likely to extend further.
TEJASNET has witnessed a strong pullback of nearly 28.5% since the low of 396 recorded on April 24. The rebound has been supported by a sharp rise in volumes. The stock has also closed above its 200-day EMA placed around 508, and sustaining above this level will be crucial for continuation of the pullback.
SAPPHIRE failed to sustain above its 100-day EMA and has witnessed selling pressure over the last five trading sessions. The RSI has slipped below the 60 mark, indicating weakening momentum. The stock has been in a prolonged downtrend and is likely to remain sideways to bearish as long as it trades below 215.
OIL has closed below the previous swing low of 456 on the daily chart and is now trading close to its 200-day EMA. The RSI is hovering near the 40 mark, indicating bearish momentum. Additionally, the MACD line remains below the zero line, further reinforcing the negative bias. As long as the stock trades below 470, the trend is likely to remain bearish.
Voltas has witnessed a correction of nearly 14% since the high of 1538 recorded on April 29. The RSI is in a falling mode, indicating weakening momentum, while DI- remains above DI+ on the ADX indicator, signalling sellers’ dominance. As long as the stock trades below the 1410–1415 zone, the trend is likely to remain bearish.(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)
