All key sectors, barring a few, ended in the red, with broader indices like the Nifty Smallcap and Midcap witnessing sharp weekly declines of 3.4% and 2.4%, respectively.
Sudeep Shah, Vice President and Head of Technical & Derivatives Research at SBI Securities, spoke to ETMarkets about the outlook for Nifty, Bank Nifty, sectoral trends, and how traders can navigate the current volatility. Following are the edited excerpts:
What do the markets look like right now, and what’s your take on the US-India trade deal?
Nifty has wrapped up its fifth straight weekly decline—its longest losing stretch in nearly two years. The weekly chart shows back-to-back bearish candles with long upper wicks, indicating that every rally attempt is being sold into. The bulls are clearly struggling to maintain momentum, while bears continue to dominate.
This weakness has been driven by multiple factors: concerns around India–US trade negotiations, persistent foreign investor outflows, and underwhelming earnings. Notably, broader markets like midcaps and smallcaps have underperformed Nifty for a second consecutive week. Relative strength charts have broken down, adding to the cautious sentiment.
Technically, Nifty is trading below its 20-day, 50-day, and 100-day EMAs. The RSI has slipped under 40, pointing to mounting bearish pressure. Immediate support lies at 24,400–24,350. A break below this can accelerate selling. On the upside, the 24,900–24,950 zone is a critical resistance. A recovery will require a strong breakout above this level. For the medium term, the 24,000–23,900 range is vital; breaching this could lead to deeper corrections.
Are banks better placed right now? What is the banking index indicating?
Bank Nifty traded in its narrowest monthly range in a year during July. After a four-month winning streak, it ended July in the red, forming a bearish candle on the monthly chart. It is currently below its 20-day and 50-day EMAs, both sloping downward.The daily RSI is also below 40 and trending lower. The MACD remains bearish. Key support lies in the 55,200–55,100 zone, and if this breaks, the next support is at 54,600. On the upside, 56,300–56,400 is the immediate hurdle.
With such volatility, how do you suggest the traders navigate the induces?
In this volatile environment, traders should focus on risk management, align with the larger trend, avoid overtrading, use multi-time frame analysis, and wait for clear price confirmation before entering trades.
Now that we are into the August series, what does the rollover data indicate? What are the trends suggesting?
The July series was marked by high volatility, with the Nifty recording gap-up or gap-down openings on 16 trading sessions—highlighting elevated market uncertainty. While the index remained range-bound in the first half, the latter half saw a spike in volatility due to global and domestic cues.
After four straight positive series, Nifty Futures ended July in the red, down nearly 3%. Sentiment was hit by concerns over India–U.S. trade talks, persistent FII selling, and underwhelming corporate earnings.
Rollover in Nifty Futures dropped to 75.71% in July—lower than June’s 79.53% and the three-month average of 78.11%—signalling reduced bullish conviction. While the number of shares rolled rose to 164 lakh (vs. 162 lakh in June), the rollover cost edged up to 0.40%, slightly above the three-month average of 0.39%.
Overall, the July series reflected a lack of follow-through in bullish momentum and a shift toward caution in the short term.
What idea is the long short ratio giving right now, especially where we see the Nifty going down?
In the new series, the FII long-short ratio dipped sharply to 9.59%, its lowest level since June 2024. This steep decline indicates a significant drop in bullish bets by foreign institutional investors, highlighting their cautious stance at the beginning of the August series.
Do you think earnings played any role in the current fall?
Yes, earnings have contributed to the current fall, especially when results failed to meet street expectations. Disappointments in heavyweight stocks triggered profit booking, adding to pressure already created by global cues and broader market weakness.
Do you think earnings lying ahead can provide any support?
Yes, upcoming earnings could offer support if key companies deliver strong results or positive guidance. Robust performance, especially from index heavyweights, may revive sentiment and attract buying interest amid the ongoing market correction.
Do you see any impact of the tariffs on the pharma sector? Or are the reactions just short-lived?
From a technical standpoint, the Nifty Pharma index has undergone a notable correction. The index has breached both its 20-day and 50-day EMA levels—an indication of short to medium-term weakness. Moreover, the daily RSI is on the verge of slipping below the crucial 40 mark and remains in a clear downward trajectory. This suggests that bearish momentum is intensifying, and unless there is a sharp reversal, further downside cannot be ruled out.
Any sectors that you are currently focusing on?
From a technical standpoint, several sectoral indices are showing signs of continued weakness and are likely to remain under pressure in the short term. These include Nifty IT, India Defence, Oil & Gas, Capital Market, Realty, Metal, PSU Banks, Media, CPSE, and PSE — all of which are struggling to gain momentum and may continue to underperform relative to the broader market.
On the brighter side, a pocket of relative strength is emerging in Nifty FMCG, which is showing encouraging signs on the charts and is likely to outperform in the near term, supported by a stable structure and consistent buying interest on dips.
Any stocks within those sectors?
Technically, JSL, Emami Ltd, Hyundai Motors, Jio Finance, Graphite, and Indigo are likely to outperform in the short term.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
