The gains were largely underpinned by rising expectations of a 25-basis-point rate cut by the U.S. Federal Reserve in December, which lifted global sentiment. Hopes of progress in Russia–Ukraine negotiations also buoyed risk assets on expectations of easing crude prices. On the domestic front, positive growth projections and sector-specific resilience continued to bolster investor confidence, although ongoing concerns around weak export performance limited the overall upside.
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:
With markets cherishing Nifty’s all-time high, what are your thoughts on the same?
Markets have turned a historic page — Nifty has broken past its 14-month ceiling to hit a fresh all-time high. Not just that, it has delivered its highest-ever weekly and monthly closing, giving the bulls a reason to celebrate louder. The strength wasn’t confined to the benchmark alone — Nifty Bank, Nifty Private Bank, Nifty Financial Services, Nifty Auto, and Nifty Infra all joined the record-high club, signalling that leadership sectors are still marching with confidence and purpose.
However, beneath the headline celebration, the broader market still appears hesitant. The Nifty Midcap 100 managed to hit a new all-time high, indicating continued institutional interest in quality mid-sized names. On the other hand, the Nifty Smallcap 100 declined for the second consecutive week and remains below its 20, 50, and 100-day EMAs, which highlights 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? Considering the current chart structure of broader indices, meaningful participation from small caps looks uncertain in the immediate term. The rally is therefore expected to remain selective, where sector rotation and stock-specific action may continue to support higher levels. Going ahead, we believe Nifty is likely to extend its upward trajectory and test 26,500, followed by 26,800 in the short term. On the downside, the 20-day EMA zone of 25,950–25,900 is likely to provide a cushion in case of any immediate decline.
What are the near-term views on Bank Nifty with the RBI MPC outcome just around the corner?
Bank Nifty continues to dominate the market narrative with its exceptional outperformance. The index not only touched a fresh all-time high last week but also closed in the green for the fourth consecutive week, reinforcing the strength of the ongoing bullish trend in the banking space.
Technically, the momentum remains robust. The RSI across all major timeframes is firmly positioned in the super-bullish zone and continues to rise, signalling strong buying interest. On the weekly chart, Bank Nifty has managed to close above the upper Bollinger Band—a rare and powerful indication of sustained upside momentum. Other key indicators mirror this bullish setup, leaving little doubt about the prevailing strength.
Going ahead, the index appears poised to extend its northward journey, with immediate targets at 60,300, followed by 61,000 in the short term. On the downside, 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 firmly in favour of the bulls, Bank Nifty is likely to remain the driving force behind the market’s upward trajectory.
Any banking sector stocks that look attractive?
Yes, a few banking stocks look attractive at current levels. The Bank Nifty/Nifty ratio chart has given a horizontal trendline breakout, indicating potential outperformance of Bank Nifty relative to 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 rallied sharply and trade near their highs, making the risk–reward less favourable. However, one name from the PSU banking space that can continue its northward journey is Canara Bank. The stock continues to outperform its own index and shows sustained 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 last two days and any follow-through move above the recent highs could fuel further upside.
Despite all the optimism, FIIs are still sellers of Indian equities. What do you think is causing that now? Why is the confidence not returning?
Foreign Portfolio Investors (FPIs) have remained net sellers in Indian equity markets through a prolonged cycle. Historically, since 2015, FPIs have turned net buyers in the secondary market during only two calendar years — 2019 and 2020.
Despite major indices delivering largely flat year-on-year returns, Indian equity valuations continue to remain elevated. The ongoing up-move in benchmark indices has lacked broad-based participation, with gains being disproportionately driven by a handful of large index heavyweights, lifting the headline index toward lifetime highs while the underlying market remains relatively subdued.
For global investors, India represents one of several competing opportunities within the broader international asset allocation spectrum. Meanwhile, India has clearly lagged in the semiconductor and advanced chip manufacturing race, with South Korea and Taiwan emerging as leaders in Asia’s tech-led momentum surge.
FPIs, traditionally momentum-driven allocators, are currently channelling capital toward global markets that are benefitting from the AI and semiconductor theme, as liquidity increasingly gravitates toward the AI trade. With capital flows favouring momentum plays, near-term allocations reflect a clear tilt toward AI-linked narratives, as emerging markets align with the ongoing technology cycle.
Do you think there are any other factors yet to be priced in that may cause a significant movement in our markets? Any macro or micro factors?
Over the next few months, several macro and micro factors could influence Indian markets. Domestically, growth momentum, favourable inflation trends and the possibility of a more accommodative RBI stance may support equities. Globally, rising Japanese bond yields and potential BoJ policy shifts could tighten liquidity, while the Fed’s rate-cut trajectory will directly impact global risk appetite and FII flows. Additionally, progress on the India–US trade deal, a major overhang, may boost sentiment and benefit export-oriented sectors. Together, these factors could shape market direction in the near term.
So, which sectors would you think one can 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 timeframes, supported by rising momentum indicators and favourable chart patterns. These sectors have been driving the recent rally and are expected to continue their outperformance in the short term.
On the flip side, some pockets of the market may struggle to keep pace. Nifty Media, Realty, PSE, FMCG, and India Defence are exhibiting signs of weakness and are likely to remain under pressure, extending their underperformance in the coming sessions.
Any stocks within those?
Technically, several stocks are showing strong setups and look promising in the near 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 favourable chart structures and momentum indicators pointing towards potential upside.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
