F&O Talk| Nifty cracks 20-DMA amid bearish momentum, macro cues keep investors on edge: Sudeep Shah

Over the past week, benchmark indices faced profit booking at higher levels. The Nifty declined by 1.22%, while the Sensex shed 925 points. Among sectors, the FMCG index outperformed with a 2.20% gain despite the overall weak market sentiment. In contrast, the Defence and IT indices saw steep declines, falling 4.50% and 3.90%, respectively.

Throughout the week, the market remained largely range-bound, but on Friday, it broke the crucial support level of 25,300/83,000, triggering intensified selling pressure post-breakdown.

Analyst Sudeep Shah, Deputy Vice President and Head of Technical & Derivatives Research, SBI Securities, interacted with ET Markets regarding the outlook on Nifty and Bank Nifty, along with an index strategy for the upcoming week. Following are the edited excerpts from his chat:

What is your view on the market with respect to the global scenario?

At present, the Indian market is relatively underperforming its global peers, with several major global indices showing bullish momentum. This divergence highlights a phase of consolidation and cautious sentiment in domestic equities.

Looking ahead, two key factors will drive the next directional move:Q1 Earnings Season – Investors will closely track corporate results for signs of margin stability, demand recovery, and management commentary, especially amid a mixed macro backdrop.Progress on the Tariff Front – Any clarity or resolution on global tariff-related tensions could significantly influence risk sentiment and capital flows.Until then, the market may remain range-bound, with stock-specific action dominating the trend. A breakout from this phase will likely be triggered by either strong earnings surprises or positive developments on the global trade front.

What would say about Nifty, given its recent weakness, especially Friday’s fall?

The benchmark Nifty index spent the first four trading sessions of the week trapped in a tight 200-point range, reflecting the indecision among market participants. But on Friday, the calm broke. The index opened with a sharp gap down, slipped below its consolidation zone, and faced renewed selling pressure, signaling that sentiment is beginning to tilt in favor of the bears.

What’s more alarming is that Nifty has now slipped below its crucial 20-day EMA, which has also begun to slope downward — a classic sign of emerging weakness. The momentum indicators aren’t painting a comforting picture either. The daily RSI has given a bearish crossover and continues to head south, while the MACD histogram has flipped into negative territory. Collectively, these signals suggest that downside momentum may be gaining strength.

From a technical standpoint, immediate support now lies in the 24900–24850 zone, where the 50-day EMA is placed. A break below 24850 could push the index toward the next key support at 24550. On the flip side, a move above the 25300–25350 zone is required for bulls to regain control in the short term.

Amid this technical caution, macro and earnings uncertainties are only adding to investor anxiety. With tariff uncertainty rising globally and Q1 earnings just getting started—kicked off by TCS on Thursday—markets are entering a critical phase. Investors are now watching for signs of margin pressures, global demand outlooks, and forward guidance from corporates. In this tug-of-war between technical breakdowns and earnings expectations, a cautious and stock-specific approach may be the best strategy for now.

What does Bank Nifty indicate?

Last week, the banking benchmark index Bank Nifty moved within a tight band of just 756 points, marking its narrowest weekly range since August 2024. This lack of movement reflects heightened indecision among market participants and a clear absence of strong directional cues from the banking space. On the weekly chart, the index has formed a small-bodied bearish candle with a long upper shadow, signaling that selling pressure is emerging at higher levels. This candlestick structure typically suggests profit-booking or cautious sentiment whenever the index tries to move higher.

Currently, Bank Nifty is hovering around its 20-day EMA level, reinforcing the view that the trend is at a crucial inflection point. The momentum indicators are hinting at a lack of conviction. The daily RSI remains in a sideways zone, as defined by RSI range-shift principles, further underscoring the ongoing consolidation.

Going ahead, the zone of 56200-56300 will act as immediate support for the index. While on the upside, the zone of 57100-57200 will act as a crucial hurdle for the index. A decisive breakout in either direction will lead to the trending move in the index.

Would you say FIIs are backing the indian markets right now?

At the moment, FII activity appears relatively subdued, reflecting a cautious stance from foreign investors. Barring some outflow on Friday, the overall participation has been muted over the last few sessions. This suggests that FIIs are likely adopting a wait-and-watch approach, especially in light of the prevailing global tariff uncertainty and lack of strong triggers in the domestic market.

Until there is greater clarity on global trade dynamics and earnings visibility improves, sustained FII buying may remain limited, keeping the broader market in a consolidation mode.

What are your views on the IT sector after TCS posted the earnings? Do you see any support from other IT majors like Wipro, Infosys, etc? Are any IT stocks looking well placed?

Post the earnings from TCS, the overall sentiment in the IT sector remains cautious. The Nifty IT index is currently trading below both its short and long-term moving averages, with the shorter averages now beginning to slope downward — a sign of increasing pressure on the sector.

Technically, the daily RSI is hovering near the 40 mark and showing signs of further weakness, which suggests that the sector could extend its southward move in the near term unless a strong catalyst emerges.

As for broader sector support, other major names like Infosys, Wipro, and HCLTech are yet to show any meaningful signs of reversal or leadership and are largely mirroring the weak trend of the index.

At present, no major IT stock stands out as convincingly well-placed, either technically or relatively, to suggest imminent outperformance. Until the index reclaims key moving averages and momentum indicators stabilize, it’s advisable to stay cautious on the IT space and wait for clearer signals of bottoming or accumulation.

Which sectors should the investors focus on amid the ongoing earnings?

The Nifty India Defense Index has broken down from a 23-day consolidation zone on the daily chart — a clear bearish signal. This breakdown is further reinforced by the index slipping below its 20-day EMA, indicating a shift in short-term trend dynamics. Adding to the negative setup, the daily RSI is on the verge of falling below the 40 mark, suggesting weakening momentum. As a result, the index is likely to extend its southward journey in the coming sessions.

In addition to the defense pack, Nifty IT and Nifty Oil & Gas indices also appear bearish and may continue to underperform in the near term, given their weak price structures and lackluster momentum indicators.

On the flip side, a few sectors are showing relative strength. Nifty India Tourism, CPSE, and PSE indices are likely to outperform in the short term, supported by improving technical setups and stronger relative momentum.

Any stocks within those sectors?

Technically, Eid Parry, Medanta, Prestige, Ramco Cement, and Asahi India 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)