The RBI’s policy announcement emerged as the key highlight of the week. The Monetary Policy Committee maintained the repo rate at 5.5% for the second straight meeting, while upgrading the FY26 GDP growth estimate to 6.8% and trimming its inflation outlook. On the domestic macroeconomic front, data presented a mixed picture—industrial output growth moderated to 4% in August, and the manufacturing PMI softened to 57.7 in September. However, a bright spot was the 9.1% year-on-year increase in GST collections to Rs 1.89 lakh crore in September, reflecting sustained consumption momentum.
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:
The markets took a sigh of relief after the MPC meeting outcome on Wednesday. How are the markets looking now?
The benchmark index Nifty wrapped up the truncated week on a positive note, closing at the 24,894 level with a gain of 0.97%, supported by a late-week rebound. On the daily chart, it formed a Record Session Count candlestick pattern and thereafter started witnessing a pullback rally. The recovery in the last two trading sessions added to the optimism, hinting at a possible continuation of the pullback rally.
A major catalyst for this move was the Bank Nifty, which delivered a strong performance, surging over 2% and forming a sizeable bullish candle on the weekly chart. The Bank Nifty to Nifty ratio chart climbed to a 30-session high, highlighting the banking sector’s relative strength. Notably, frontline banking stocks such as Kotak Mahindra Bank, Axis Bank, and HDFC Bank were key contributors to this rally, driving sectoral leadership and investor confidence. In addition, the Nifty IT index, which had been undergoing a corrective phase, showed signs of stabilization. The slowdown in its decline helped support the broader market, aiding the pullback and reducing downside pressure.However, for the current rebound to gain meaningful traction, a decisive follow-up move in the coming week is essential. Sustained buying interest across key sectors—especially in banking and large-cap names—will be crucial to confirm the strength of this recovery and avoid another phase of consolidation or profit booking.Talking about levels, the zone of 25,050–25,100 will act as a critical hurdle for the Nifty, as the 61.8% Fibonacci retracement level of the recent decline is placed in that region. A sustainable move above 25,100 could trigger a sharp pullback rally, potentially extending towards the 25,400 mark, where further resistance may emerge. On the downside, the support zone of 24,600–24,550 remains vital. A breach below this range could invite renewed selling pressure and dampen the recovery momentum.
What’s the view on Bank Nifty right now?
Bank Nifty has delivered a stellar performance this week, decisively outperforming the broader market indices. The banking benchmark surged over 2%, closing the week above the 55,500 mark. This marks its highest weekly close since the last week of July 2025, underscoring a strong resurgence in banking stocks. On the weekly chart, the index has formed a large bullish candle, reflecting sustained buying interest and positive sentiment across the sector.
Key drivers of this rally were Kotak Mahindra Bank, Axis Bank, and HDFC Bank, which contributed significantly to the index’s upward momentum. Their strength helped lift the overall tone of the banking space.
From a relative strength perspective, the Bank Nifty to Nifty ratio chart has hit a 30-session high, signalling clear and consistent outperformance of banking stocks over the frontline indices. Technically, the index has reclaimed its key moving averages, reinforcing the bullish undertone. Moreover, the daily RSI is on the verge of crossing the 60 level, and remains in a rising trajectory — a sign of strengthening momentum.
Going ahead, considering the current chart structure, the index is likely to continue its northward journey and test the level of 56,200, followed by 57,000 in the short term. While, on the downside, the 20-day EMA zone of 55,000-54,900 will act as important support for the index.
What’s the view on FII stats right now? They seem unsupportive right now. Do you think DIIs can sustain the markets for long?
FIIs have been net sellers over recent months. In September 2025, FIIs withdrew about Rs. 35301 crores from Indian equities, continuing their multi-month exit streak. In July & August, FIIs dumped over Rs 94,570 crore in Indian stocks, pressured by stretched valuations, weak earnings, and global uncertainties.
On the flip side, DIIs have been stepping in aggressively. In the last three months, the net inflows from the DIIs stood at Rs 2,21,111 crore. Despite FII outflows, domestic flows have helped anchor the markets.
Historically, DIIs have often bought aggressively when FIIs sell, acting as a stabilizer. Their flows are more stable since they are driven by domestic savings, SIPs and policy support. With more retail participation and domestic institutional capital, the depth and resilience of the market are improving.
Having said that, if external headwinds like interest rate changes, US dollar strength, trade tensions intensify, domestic flows may not be enough to offset them. In the near term, DIIs can help sustain and stabilize the markets, especially in a volatile external environment where FIIs remain wary.
If FIIs remain absent, markets may still inch up, but the pace and breadth may remain constrained. But for a durable, sustained upward trend, a reversal in FII flows or renewed foreign confidence is likely necessary.
Which sectors are you focusing on now?
Technically, Nifty Metal, Nifty PSU Bank, Nifty Private Banks, Nifty CPSE, Nifty PSE and Nifty Financial Services are likely to continue their outperformance in the short term.
While, on the other hand, Nifty IT, Nifty Consumer Durable, Nifty FMCG, Nifty Pharma, Nifty Healthcare and Nifty Realty are likely to underperform in the short term.
Any stocks within those sectors?
Technically, Kotak Bank, Bharat Electronics, BHEL, Canara Bank, Panjab National Bank, JSW Steel, Tata Steel, National Aluminium, Shyam Metalics and Minda Corp 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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