F&O Discuss| Nifty continues downward path, technical indicators present persistent weak spot: Sudeep Shah
The broader pattern of the market stays cautiously bearish, however oversold alerts from the symptoms and the proximity to key assist zones recommend a possible bounce could also be on the playing cards.
Analyst Sudeep Shah, Vice President and Head of Technical & Derivatives Analysis, SBI Securities interacted with ET Markets relating to the outlook on Nifty and Financial institution Nifty together with an index technique for the upcoming week. Following are the edited excerpts from his chat:
What’s the present tackle Market?
The benchmark Nifty index prolonged its dropping streak for the sixth consecutive week, marking its longest stretch of weekly declines because the COVID-19 market crash in 2020. This persistent weak spot underscores the prevailing bearish sentiment out there. What stands out technically is that for the fourth week in a row, the index has shaped a bearish candle with a protracted higher shadow. This formation alerts that each try at a rally is being met with robust promoting strain, indicating an absence of conviction amongst bulls and a transparent dominance of bears at larger ranges.
Throughout the week, market sentiment weakened additional after U.S. President Donald Trump imposed a 25% tariff on Indian items, escalating commerce tensions over India’s Russian oil imports. The temper was additional dampened by weak Q1 earnings throughout key sectors and continued FII promoting, which added to the strain on equities.
From a technical standpoint, the Nifty index continues to exhibit pronounced weak spot. It’s now comfortably buying and selling beneath its 20-day, 50-day, and 100-day EMAs, all of that are sloping downward — a transparent signal of sustained bearish momentum. Including to the unfavorable outlook, the RSI on the day by day chart has entered an excellent bearish zone, as per RSI vary shift ideas.
Additional affirmation comes from the MACD indicator, which stays in bearish territory. The MACD line is quoting beneath each its sign line and the zero line, reinforcing the downtrend and indicating that promoting strain continues to dominate. General, the technical setup paints a cautious image for the close to time period, with rallies more likely to face resistance and promoting rising at larger ranges.
Speaking about essential ranges, the zone of 24200-24150 will act as essential assist for the index as it’s the confluence of the 200-day EMA stage and 38.2% Fibonacci retracement stage of its prior upward rally (21743-25669). If the index slips beneath the 24150 stage, then it’s more likely to lengthen its southward journey upto the 23750 stage. On the upside, the 100-day EMA zone of 24570-24600 will act as an important hurdle for the index.
How has the August collection performed out to this point? How has it been traditionally for the Indian market?
Monitoring seasonality, over the previous 18 years, the August month has typically exhibited a blended pattern for Nifty. On 9 events, the index has concluded on a optimistic observe with a mean achieve of three.68%, whereas on 9 events, it has ended on a unfavorable observe with a mean lack of 4.45%. The common return for Nifty within the August collection has been -0.39%. Over the previous 18 years, August has persistently proven a mean volatility of seven.30 p.c for the Nifty index.
Traditionally, Financial institution Nifty has additionally proven a blended pattern in August over the previous 18 years. Out of those, it closed positively 9 occasions, with a mean achieve of three.57%, whereas ending negatively 9 occasions, with a mean lack of 6.30%. The common return for Financial institution Nifty within the August collection has been -1.37%. Nevertheless, Financial institution Nifty has demonstrated a mean volatility of roughly 10.08 p.c for the previous 18 years.
Are Trump’s tariffs more likely to additional dampen the sentiment?
Sure, Trump’s tariffs are more likely to additional dampen market sentiment, particularly given the already fragile investor temper. The imposition of a further 25% tariff on Indian items provides a layer of geopolitical and commerce uncertainty, which might weigh closely on sectors immediately impacted by exports to the U.S.
Nevertheless, it is essential to notice that the efficient date of the tariffs is August 27, and till then, markets might stay unstable as buyers carefully monitor developments round potential negotiations or diplomatic responses. Any indicators of easing tensions or backtracking on the choice might assist restrict the draw back, however for now, the transfer provides to the listing of headwinds going through the market.
What’s your tackle Financial institution Nifty? What are the important thing ranges to observe?
The banking benchmark index Financial institution Nifty additionally ended the week on a unfavorable observe, reflecting continued weak spot within the monetary area. On the weekly chart, it shaped a bearish candle, indicating persistent promoting strain. Over the past two classes, the index has been hovering close to its 100-day EMA.
Going ahead, the 100-day EMA zone of 54950–54850 shall be a essential assist space. A sustained transfer beneath 54850 might intensify the downtrend, opening the gates for a decline towards the subsequent assist zone of 54000–53900. On the upside, any restoration is more likely to face resistance close to 55700–55800, which now acts as a key hurdle for the bulls.
Any hopes from the FII now? What do the money phase in addition to the FII long-short ratio point out?
Given the present information, hopes from FIIs stay restricted within the close to time period. Month-to-date, FIIs have bought equities value 14018.87 crore, reflecting a transparent risk-off strategy amid world uncertainties and home headwinds.
Moreover, the FII long-short ratio for index futures stands at simply 8.28%, the bottom in current intervals, indicating a closely bearish positioning. This means that FIIs are predominantly holding brief positions, reinforcing their cautious outlook on Indian equities.
Nevertheless, from a contrarian perspective, such an especially low long-short ratio might additionally sign that the market is oversold within the brief time period, and any optimistic set off — reminiscent of easing world tensions or beneficial home cues — might result in brief protecting, leading to a pointy rebound.
What’s the view on Auto and Pharma shares?
Nifty Auto: The Nifty Auto index has been consolidating within the 24226–22916 vary for the previous 59 buying and selling classes, displaying resilience amid broader market weak spot. It has outperformed frontline indices just lately and averted important correction through the broader market decline. The ratio chart vs. Nifty is at a 24-week excessive, highlighting relative power. Technically, the index is buying and selling above its 100 and 200-day EMAs, indicating a optimistic undertone. Nevertheless, momentum indicators stay sideways, suggesting an absence of robust directional bias. Going ahead, a break above 24000 might set off a pointy rally, whereas the 200-day EMA zone of 23100–23050 will act as essential assist on the draw back.
Nifty Pharma: The index has slipped beneath its 200-day EMA for the primary time since Could 2025, signaling a possible shift in its long-term pattern. Including to the bearish tone, the day by day RSI has entered an excellent bearish zone, as per RSI vary shift ideas, indicating weakening momentum and an absence of shopping for curiosity. Given these developments, the index is more likely to lengthen its downward trajectory over the subsequent few buying and selling classes. On the draw back, the assist zone of 21100–21000 shall be essential. A breach beneath this stage might speed up promoting strain and deepen the correction.
How is the IT sector trying proper now?
The Nifty IT index continues to exhibit a bearish pattern, characterised by a constant sample of decrease highs and decrease lows. It stays beneath key transferring averages, indicating sustained weak spot in momentum. Moreover, the day by day RSI is firmly positioned within the bearish zone, as per the RSI vary shift framework. Given these technical alerts, the index seems poised to increase its downward trajectory over the approaching buying and selling classes.
Are there any shares to take defensive bets because the indices appear tough to commerce?
Technically, Kajaria Ceramics, Affle, and Pidilite Industries are trying good.
(Disclaimer: Suggestions, recommendations, views and opinions given by the consultants are their very own. These don’t signify the views of The Financial Instances)
