F&O Talk| Despite recession fears, Nifty rallies sharply. Bullish momentum likely to continue: Sudeep Shah of SBI Securities

Markets saw a sharp rebound this week, climbing over 4.5% in the holiday-shortened week, driven by upbeat cues from both domestic and global fronts. Benchmark indices kicked off the week with a strong gap-up opening and sustained the momentum in subsequent sessions. As a result, the Nifty and Sensex closed near their weekly highs at 23,851.65 and 78,553.20, respectively.

All major sectors contributed to the market’s upmove, with realty, banking, and financials leading the gains. Other sectors also registered solid advances. The broader indices kept pace with the benchmarks, rising over 4% each, underscoring the broad-based strength of the rally.

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 for the upcoming week. The following are the edited excerpts from his chat:

What are your views on markets, given the macroeconomic factorslike uncertainties around the tarrif wars?

"The strongest rallies are born from the depths of doubt." This is what we have witnessed in the last couple of trading sessions. The benchmark index Nifty has staged a sharp rally from its recent low of 21,743.65, gaining over 2,100 points in just seven trading sessions — marking one of the fastest upswings in recent times. This remarkable rally has pushed the index above both its short and long-term moving averages. Notably, the 20-day and 50-day EMAs have begun to curve upward, reinforcing the bullish momentum. Adding further strength, the daily RSI has surged past the 60 mark and continues to rise, indicating increased buying interest.

What makes this rebound even more remarkable is the context in which it has unfolded — a period clouded by uncertainty, driven by trade war tensions and looming recession fears. Yet, amid the noise and negativity, the market has managed to flip the script with a sharp turnaround. It’s a classic example of how markets often recover with force just when conviction is hardest to find.

The Banking and Financial Services sectors have been the primary drivers of this rally. The Nifty Financial Services index has clocked a fresh all-time high, while Bank Nifty is just a stone’s throw away from its record levels. Interestingly, the Nifty Midcap and Nifty Small Cap 100 indices have lagged behind in the last couple of sessions, highlighting that this rally has been primarily powered by large-cap names.

At present, the Nifty is hovering around a key resistance zone of its prior swing high’s. We believe it is likely to continue its northward journey in the next couple of trading sessions.

Where do you think Nifty is headed?

Any sustainable move above the zone of 23,900-23940 will lead to a sharp upside rally in the index upto the level of 24,200, followed by 24,500 in the short term. While on the downside, 23,600-23,550 is likely to provide the cushion in case of any immediate decline.

On the daily chart, Nifty has certain gaps from the time when the markets were showing resilience and the index was opening with gap ups. Do you anticipate these to be filled anytime soon? Something which is looked out in technical analysis?

Considering the sharp speed of the current rally, those gaps may not be filled immediately. Unless there's a significant pause or pullback, the momentum suggests the index might continue higher before revisiting those zones.

Bank Nifty is definitely better than Nifty right now. Everyone is bullish on banks. What are your inputs on this? Where do you see it heading, and what are the triggers behind this?

Bank Nifty does seem to have the upper hand over Nifty right now, and the data backs it. The banking index has been clearly outperforming the broader market over the last few sessions. It’s just a stone’s throw away from its all-time high, while Nifty still trades more than 9% below its peak — a clear sign of sectoral strength.

What’s even more interesting is the ratio chart of Bank Nifty versus Nifty, which is now at an 81-week high, reinforcing the relative outperformance.

Technically, with the index hovering near all-time highs, all key moving averages and momentum indicators are aligned positively, indicating strong bullish momentum. We expect this northward journey to continue, with Bank Nifty likely heading toward the 55000 mark in the near term. On the flip side, the 53800–53700 zone is expected to act as immediate support in case of any short-term dip.

What's your view on HDFC Bank and ICICI Bank?

Both stocks are in a strong uptrend, and they have recently given a consolidation breakout. The momentum indicators and moving averages-based setups are suggesting strong upside for both stocks.

What is the sense that the FII activity is giving right now?

Over the last three trading sessions, FIIs have turned net buyers in the cash segment, signaling a shift in sentiment. This coincides with visible accumulation in large-cap stocks, suggesting that FIIs are selectively adding quality names to their portfolios. Additionally, the sharp rise in the long-short ratio of index futures—from 21.59 to 29.52—indicates that FIIs are actively covering their short positions. Taken together, this suggests a cautiously optimistic stance from FIIs, with a focus on large-cap stability amidst market uncertainty.

Earnings have started, and 2 IT majors have reported their results- TCS and Wipro. What do you infer from these, and how are these stocks placed?

While earnings season has kicked off with TCS and Wipro reporting their numbers, the technical structure of both stocks remains weak. They are currently trading below their key short and long-term moving averages, which are sloping downward—a clear sign of a prevailing downtrend. The momentum indicators and oscillators further reinforce the bearish sentiment, pointing to continued weakness. Given this setup, it's advisable to avoid these stocks for now until signs of a trend reversal emerge.

What about the IT sector? Investors are keenly looking forward to Q4 earnings. Do you have any views on the sector based on the earnings so far? Or are the charts trying to tell us something?

Technically, Nifty IT is in a strong downtrend as it is marking the sequence of lower tops and lower bottoms. Also, it is trading below its short and long-term moving averages. The daily RSI is in bearish zone. Hence, we believe the index is likely to continue its downward journey in the next couple of trading sessions.

Talking about crucial levels, the 20-day EMA zone of 34800-34900 is likely to act as an immediate hurdle for the index. While, on the downside, any sustainable move below the level of 32100 will lead to resume its southward journey.

Amid any uncertainties, the FMCG sector emerges as a safe pocket. Your thoughts? And any specific stocks that offer safe positioning for the participants?

In times of market uncertainty, the FMCG sector often acts as a defensive haven, and current technicals support this view. The Nifty FMCG index has recently moved above its 200-day EMA, a key long-term indicator, while the daily RSI remains in bullish territory—both signaling underlying strength. Among the index constituents, Nestle India, Britannia Industries, Marico, Tata Consumer, and Radico Khaitan stand out with stable chart structures and positive momentum. These names offer relatively safer positioning for participants looking to navigate volatility with lower risk.

Can you help us know if there are any other sectors that you might be looking at?

Technically, private banks, PSU banks, financial services, CPSE, PSE, defense, India Tourism, Capital Market space are looking good. These sectors are either holding above key moving averages or breaking out of consolidation zones, backed by improving momentum indicators. They present attractive opportunities for participants looking for sectoral strength amid the current market dynamics.

Any stocks within those sectors?

Technically, Kotak Mahindra Bank, Axis Bank, Bajaj Finserv, Indigo, Shriram Finance, Industower, Bank Baroda, Bank India, TVS Motors, Reliance Industries and Gail 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)