The market’s tone for the week was influenced by a blend of domestic and global factors.
Domestically, positive cues such as higher GST collections, strong festive-season retail sales, and progress in India–US trade discussions offered some support. However, sentiment remained fragile due to mixed corporate earnings, a sharp drop in exports to the US, and persistent FII outflows.
On the global front, renewed concerns over stretched valuations in AI-related stocks sparked profit-booking across major markets, dampening overall risk appetite.
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:
Nifty ended the third week in losses despite a good earnings season. What do you think is happening here?
The benchmark index Nifty had delivered a strong Symmetrical Triangle breakout in October. Post-breakout, the index extended its upward trajectory, marching steadily towards its all-time high. However, despite the initial strength, it struggled to surpass the record peak, triggering a swift bout of profit-taking. From the recent high of 26,104, Nifty slipped nearly 800 points in just 10 trading sessions, reflecting short-term fatigue after an extended rally.
Interestingly, Friday’s session turned out to be a crucial technical checkpoint. The index successfully retested the breakout zone, which also aligns closely with the 50-day exponential moving average (EMA), a level often seen as a key dynamic support in trending markets. The subsequent smart rebound from this confluence zone highlights renewed buying interest and reinforces the strength of the broader uptrend.
Going forward, the zone of 25,300–25,250 is expected to act as a critical support for the Nifty index. This region not only marks the recent retest of the breakout zone but also aligns with the 50-day EMA, reinforcing its technical significance. On the upside, the 25,650–25,700 range emerges as a crucial resistance. A sustained move above 25,700 could trigger a fresh leg of the rally, potentially driving the index towards 26,000, and eventually 26,300 in the short term.
Traders and investors should closely monitor price action around these levels, as a decisive breakout or breakdown could set the tone for the next directional move in the index.
What is your take on the FII activity now, and why is their conviction so high on selling?
Money tends to follow momentum, and over the past year, global equities have witnessed robust rallies across markets like Korea, Taiwan, and Vietnam, as well as developed economies such as the U.S., Japan, and China. With these regions delivering exceptional returns, FIIs have found more attractive opportunities abroad, leading to a relative reduction in their exposure to India.
Moreover, India has lagged in the global AI and semiconductor boom, where economies like Korea and Taiwan are dominant players. Elevated valuations, subdued near-term returns, and limited participation in emerging global growth themes have collectively prompted FIIs to trim their India allocations.
On a year-to-date basis, FIIs have remained consistent sellers, offloading equities worth Rs 2.55 lakh crore in the cash segment in 2025 — extending their selling streak that began in 2021
Do you see them turning into buyers soon?
From an FII standpoint, India is one among several global allocation choices rather than a standout destination. Nifty’s flat year-to-date performance highlights its relative underperformance against global peers. Despite prolonged consolidation since last September, Indian equities remain expensive, having corrected more in time than in price — leaving valuations elevated compared to other emerging markets.
In essence, the recent FII outflows reflect a global portfolio realignment — not a loss of confidence — as capital shifts toward markets and sectors displaying stronger momentum and more attractive relative value.
Let’s talk about Bank Nifty. Technically, it has been forming indecisive candles for the past 3 weeks. What is this indicating?
The Banking benchmark index, Bank Nifty, continues to be the star performer on Dalal Street, consistently outperforming the broader market over the past few months. Even in the last week, while the Nifty index slipped nearly 1%, Bank Nifty managed to close in the green, extending its relative strength and reaffirming its leadership within the market structure.
Notably, the Bank Nifty-to-Nifty ratio chart is at a 68-day high, reflecting strong relative momentum. The ratio continues to form higher tops and higher bottoms, a classic sign of sectoral dominance and sustained buying interest in banking heavyweights.
From a technical standpoint, the index remains comfortably above its key moving averages, underscoring the prevailing bullish undertone. The daily RSI has once again crossed the 60 mark and is trending higher, indicating that momentum is gradually rebuilding after a brief consolidation phase.
Going ahead, the 20-day EMA zone of 57,500–57,400 is likely to act as a vital support base, cushioning any short-term dips. On the flip side, the 58,200–58,300 zone stands out as a crucial resistance area. A decisive close above 58,300 could ignite a fresh leg of the rally, potentially propelling the index towards 59,000, and further to 59,600 in the near term.
Overall, as long as Bank Nifty continues to defend its short-term supports and maintain leadership on the ratio chart, the broader market sentiment is expected to remain resilient, with banking stocks leading the charge once again.
The major constituents, HDFC Bank and ICICI Bank, also do not seem to be helping. What do you think is causing the pressure on these 2 heavyweights?
Following the results, both HDFC Bank and ICICI Bank have witnessed profit booking, with ICICI seeing sharper pressure. Additionally, SEBI’s recent announcement on changes to the Nifty Bank index composition has triggered concerns of forced selling and rebalancing.
Under the new rules, the combined weight of the top three constituents will be capped at 45% (down from ~62%), to be implemented in four tranches by March 2026. As of end-October 2025, HDFC Bank and ICICI Bank hold weights of ~27.97% and ~23.01%, respectively—well above the 20% individual cap.
Consequently, passive and index-tracking funds will need to pare down holdings in these banks to align with the revised limits, prompting near-term selling pressure in both counters.
So far, which sectors have posted the best Q2 results according to you and are those the sectors where investors and traders can seek comfort in?*
On the sectoral front, indices such as Nifty Bank, Nifty Financial Services, Nifty Metal, Nifty PSU Bank, Nifty Oil & Gas and Nifty Capital Market have shown strong rebounds from their respective support zones, adding breadth to the recovery and signalling potential sectoral leadership if the uptrend resumes.
On the other hand, Nifty Consumer Durable, Nifty FMCG, Nifty IT, Nifty India Tourism and Nifty Media are likely to continue their underperformance in the short term.
Lastly, do you have any stock recommendations for our readers?
Technically, ABCAPITAL, M&M, SAIL, BSE, CDSL, BANKINDIA, UNIONBANK, BAJFINANCE, JINDALSTEL, TATASTEEL, MFSL, PAYTM, RADICO and UPL 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)