Global cues remain negative for Monday trade as US markets ended with sharp cuts on Friday amid AI-induced fears along with a sharp spike in January wholesale inflation to 2.9%, much higher than the estimates of 1.6%.
Also read: Infosys ADRs tumble 5%, Wipro slips over 3% as Wall Street rattled by inflation data and AI fears
Meanwhile, in a major geopolitical development, Israel launched a preventative attack against Iran on Saturday.Analyst Sudeep Shah, Vice President and Head of Technical & Derivatives Research at SBI Securities, interacted with ETMarkets 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:
Q: What do Nifty charts suggest for next week’s action after the index fell 1.5% WoW, slipping below 25,200?
February’s market action can be summed-up in a common saying that “when volatility climbs, clarity fades and emotions take over”. The month was dominated by sharp swings, with the benchmark index Nifty moving within a wide 1,770-point band — its broadest monthly range since April 2025. Elevated uncertainty led to swift price adjustments, driving sharp intraday as well as positional moves across the market.
The first half witnessed intense turbulence, while the latter half shifted into a sideways consolidation. Yet even during this phase, price action remained erratic, marked by frequent gap-up and gap-down openings — a sign of lingering nervousness. Nifty eventually closed near the 25,200 mark, down a modest 0.56% for the month. The formation of a High Wave candle on the monthly chart reflects strong indecision and a clear tug-of-war between bulls and bears, raising a key question: is this consolidation a base before expansion or fatigue before decline?The recent range-bound movement has flattened long-term moving averages, signalling a pause in trend momentum. Momentum indicators have also turned neutral, suggesting a lack of conviction. However, Friday’s breakdown below the 200-day EMA adds a cautious undertone.
Technically, the 24,950–24,900 zone remains a crucial support band; a decisive breach below 24,900 could drag the index toward 24,600. On the upside, 25,450–25,500 stands as a key resistance zone, and only a sustained breakout above this hurdle can revive bullish momentum. These levels are likely to set the tone for March.
Sectorally, Information Technology was the clear laggard. The Nifty IT index plunged nearly 20% in February — its sharpest monthly fall since September 2008 — amid rising concerns over AI-led disruption, revenue visibility, and pressure on traditional service models, triggering aggressive unwinding across the IT pack.
Q: The start to the March series is weak with Nifty now below key moving averages. Can investors take heart from the fact that March is seasonally a strong month for markets or do you think further slide?
Although March has typically been a strong month for the Nifty, the present technical structure warrants caution. The index has slipped below the crucial 25,370–25,350 support band and closed under its 200-day EMA (25,248) on the daily chart — a key long-term indicator. It has also filled most of the 533-point gap created on February 3 following the interim India–US trade deal, reflecting fading bullish momentum.
Seasonal trends remain encouraging: over the past 20 years, March has delivered gains in 14 instances with an average rise of 5.71%, while the six negative years saw an average decline of 7.11%.
That said, near-term direction hinges on price behaviour. A quick move back above the 200-day EMA is crucial; prolonged trade below it may deepen weakness despite favourable seasonality.
Q: What does the F&O data suggest about the range for Nifty in March and under the current situation what strategy should be applied in the buy and sell side?
FIIs were net sellers to the tune of Rs 7,536 crore on February 27. In the last two sessions of February alone, they have offloaded a whopping Rs 11,000 crore, extending their selling streak every month since July 2025.
The long–short ratio, which had steadily improved to 29% on February 23, slipped sharply to 18% by February 27, reflecting a clear rise in bearish positioning.
Notably, this wave of selling has coincided with the Nifty breaking below its key support zone and closing beneath the 200-day EMA, a technically weak development.
Unless the index swiftly reclaims this crucial level with supportive institutional flows, the overall market structure is likely to remain fragile in the near term.
Q: New-age stocks have seen severe selling pressure this week extending their 2026 underperformance and profit booking is seen even in those stocks which have delivered strong earnings. As valuations remain a key challenge, do you see the risk-off trade to continue till sentiments improve?
The cautious tone in new-age stocks is likely to continue until valuations and investor sentiment reach a more sustainable balance. Many of these companies still trade at elevated multiples, and even healthy earnings are being used as opportunities to book profits — indicating valuation fatigue rather than any sharp deterioration in fundamentals.
The weakness has been compounded by pressure in the broader tech ecosystem. The IT space emerged as February’s biggest underperformer, with the Nifty IT index tumbling nearly 20% — its sharpest monthly decline since September 2008. Rising concerns around AI-driven automation and its impact on revenue visibility and legacy service models have undertaken investor confidence.
Given that most new-age firms are fundamentally tech-centric — dependent on digital platforms, cloud infrastructure, and data scalability — negative sentiment in IT often spills over into this segment. Until earnings visibility strengthens and valuations moderate, markets are likely to maintain a risk-off bias toward these names.
Q: Private banks have struggled while PSU banks faired well. What will be your suggestion to investors on the banking sector and where do you see buying opportunities?
Technically, Nifty PSU Bank is strongly outperforming the frontline indices. Hence, we recommend to look for buying opportunity in PSU Banking space.
Q: What is your view on IT stocks after yet another bad week?
The IT sector remains under sustained pressure on both fundamental and technical fronts. After emerging as February’s biggest laggard, the Nifty IT index tumbled nearly 20% — its sharpest monthly drop since September 2008. Ongoing concerns over AI-led automation, revenue visibility, deal pipelines, and the viability of traditional service models continue to weigh heavily on sentiment.
From a technical standpoint, the structure has deteriorated further. The index has slipped below the key 31,000–31,300 support zone on the daily chart—an area that previously triggered strong buying interest, but this time failed to attract demand.
Momentum indicators reinforce the weakness. The RSI is deeply oversold around 22, ADX is rising—signalling a strengthening downtrend—and MACD remains well below the zero line. Unless the index reclaims 31,000–31,300, the outlook stays negative, with any recovery likely to be slow rather than swift.
Q: Realty stocks have been falling primarily on AI-led fears for the IT industry which is a big employer and uses commercial real estate. What is your assessment of the situation?
The concern isn’t entirely misplaced. IT remains one of the largest occupiers of commercial real estate, so any slowdown in hiring, capex, or expansion plans can directly soften office demand and rental momentum. That said, the current weakness in realty stocks cannot be attributed solely to AI-led fears in the IT space.
Technically, the Nifty Realty index has been in a clear downtrend and continues to trade below its key moving averages, signalling persistent structural weakness. Importantly, this downtrend had already set in well before AI concerns began weighing on IT sentiment, suggesting broader sector-specific pressure.
Relative performance also paints a cautious picture. Both the Realty and IT indices are underperforming the Nifty, as reflected by the falling ratio line in their respective ratio charts with respect to Nifty. Until we see signs of stabilization or a decisive reversal, bottom fishing in these spaces is not advisable.
Q: Markets have been quite volatile which offers traders opportunities to make money in derivatives and intraday cash markets. How to make the best use of this?
Volatility is a double-edged sword. It creates opportunity, but also amplifies mistakes. In fast markets, intraday ranges expand and option premiums become attractive, which can reward traders who work with clear setups and predefined risk. But volatility punishes impulsive trading and over-leveraging.
To make volatility your friend, start by reducing position size. Faster markets demand tighter risk control, not bigger bets. Be highly selective and trade only around strong technical levels or clear momentum. Also, match your strategy to the market condition: trending volatility favours breakouts, while choppy volatility suits mean-reversion or option-selling with appropriate hedge approaches.
Most importantly, respect stop losses without exception. Volatility magnifies both gains and drawdowns. If one can stay disciplined and patient, volatility can enhance returns but if one chases every move, it can quickly turn into your biggest foe.
Q: Tejas, J&K Bank and Finolex have been star performers this week while UPL, Godfrey and Inventurus have been big losers. What should investors do with them?
Tejas Networks has seen strong buying from the 312 zone with volume support, which is encouraging. However, it’s still premature to call this a full trend reversal. Momentum indicators are improving, but the stock must sustain higher levels and hold recent gains to confirm strength. Fresh aggressive buying may be avoided until follow-through is visible.
J&K Bank looks technically stronger. The stock has delivered a horizontal trendline breakout backed by robust volumes, and DI+ crossing above DI− adds conviction. As long as it holds above 115–116, the bullish bias remains intact.
Finolex Industries has also given a clean consolidation breakout and is trading above key moving averages. With RSI trending higher, the upmove can extend as long as it holds above the 865–860 zone.
On the weak side, UPL has broken below its prior swing low of 645 with RSI slipping under 40, a sign of building weakness. Any sustained trade below current levels may invite further downside.
Godfrey Phillips faced stiff resistance at its 200-day EMA and has since weakened. RSI rejection near 60 and trade below key averages keep the trend fragile. Bias remains weak as long as it trades below 2300.
Inventurus has seen sharp selling pressure. RSI near 30 and rising ADX indicate strengthening bearish momentum. As long as it stays below 1480, the downtrend is likely to persist.
(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)