Sectoral performance remained mixed during the week. Metals, Energy, and Realty stocks saw gains, while Auto, Pharma, and IT sectors came under pressure due to profit-taking. Despite overall volatility, broader indices outperformed, with the Midcap index up 1% and the Smallcap index rising 0.7%, reflecting selective buying across segments.
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:
The Nifty has staged a strong performance over the last week. What factors do you think drove this rally and how far do you see it going in the November series?
Nifty spent the week in a volatile yet consolidative phase after a stellar 1,500-point October rally from 24,588. The index neared its all-time high but lost momentum amid profit booking and global caution. A weekly Shooting Star candle hints at short-term exhaustion, though the broader uptrend remains intact. The index has moved in a tight 26,104–25,711 range for 11 sessions, with RSI cooling to 57.8 and ADX still supporting trend strength. Global cues, especially Powell’s hawkish stance post the rate cut, weighed on sentiment, while optimism around a possible India–US trade deal provided mid-week support. Going ahead, 25,520–25,500 remains key support, with resistance at 26,100–26,150. A breakout above this zone could trigger renewed bullish momentum toward record highs.
Are FIIs massive sellers in the index? Does this ring a cautionary bell for us?
FIIs ended October as net sellers worth Rs 2,347 crore, despite expiry-day inflows of Rs 10,339 crore, largely driven by derivative adjustments. They squared off over 1.2 lakh stock futures, signaling position unwinding rather than fresh longs. The long-short ratio dropped from 26% to 17%, reflecting rising short positions. Macroeconomic cues—firm U.S. yields near 4.08%, a strong dollar at Rs 88.73, and DXY hovering near 100—add to cautious sentiment. With India VIX inching higher, volatility may persist in the near term. FIIs are likely to remain watchful ahead of developments around the India–US trade deal and Bihar elections in November. Overall, the data reflects a defensive undertone, suggesting selective participation rather than aggressive risk-taking by foreign investors.
What is your take on the Bank Nifty?
Bank Nifty consolidated after hitting a record high of 58,578, indicating profit booking at upper levels even as the broader structure remains positive. The index briefly surpassed the 58,200–58,300 resistance but later saw selling pressure, forming a bearish candle with a long upper shadow. The weekly pattern resembles a Tweezer Top—an early sign of momentum fatigue. RSI eased from 76.6 to 62.3, reflecting moderation after an overbought phase, while MACD and ADX continue to confirm a strong trend. Support lies at 57,600–57,500, near the 23.6% Fibonacci retracement zone. On the upside, a decisive move above 58,500 could reignite momentum, pushing the index toward 59,000–59,500. Overall sentiment remains constructive, though traders may prefer buying on dips rather than chasing highs.
How do you think SEBI measures of capping the weights of Bank Nifty constituents affect the index as well as its independent constituents?
SEBI’s decision to cap Bank Nifty weights will make the index more balanced and less reliant on a few large banks. The top constituent’s weight will reduce from 33% to 20%, while the combined share of the top three will fall from 62% to 45%, implemented in phases till March 2026.
This change will curb volatility and concentration risk, ensuring a fairer representation of mid-sized banks.
While it could slightly temper index gains during phases when heavyweights like HDFC Bank or ICICI Bank outperform, it opens the door for greater participation from PSU and mid-tier lenders such as Union Bank, Indian Bank, and Bank of India.
Overall, the move enhances diversification and index stability over the long term.
Talking of the November series. What is the rollover data suggesting?
The October series was exceptional for Nifty futures, with the index rallying 5.29%—its best monthly gain since June 2024. Despite this strong performance, rollover slipped to 75.79% from 82.60% in September, hinting at position unwinding or short-covering rather than aggressive rollover buying. Nifty consolidated in a 25,711–26,104 band through late October, indicating traders were awaiting fresh triggers.
However, all key moving averages remain positively aligned, reaffirming a sustained bullish structure. Momentum indicators continue to signal underlying strength, suggesting the uptrend could extend into the November series. While minor pullbacks are possible, the broader setup favors continued upward movement, provided the index decisively clears resistance near 26,100.
Which sectors can an investor focus on now?
Several sectors remain positioned for outperformance.
PSU Banks continue to lead, with the PSU Bank Index at record highs and indicators such as RSI and MACD showing sustained strength.
Oil & Gas has broken out of a long-term downtrend, supported by a bullish MACD crossover.
Realty is consolidating above major averages with rising ADX, signaling an emerging uptrend. Manufacturing has rebounded from its 100-day EMA with renewed buying interest, while Infrastructure has also given a trendline breakout versus Nifty, confirming relative strength.
Metals, despite mild profit booking, remain in a solid bullish zone above key moving averages.
Overall, these sectors—PSU Banks, Oil & Gas, Realty, Manufacturing, Infra, and Metals—are expected to continue their leadership in the near term.
Any stocks within those sectors?
Within the outperforming sectors, select stocks continue to show strong technical and fundamental setups.
In PSU Banks, Union Bank, Canara Bank, and Bank of Baroda remain top picks, supported by strong earnings traction and improving credit metrics.
In Oil & Gas, IOC, Oil India, BPCL, and Chennai Petroleum offer value with robust refining margins and policy tailwinds.
Realty names Sobha and Oberoi Realty show strength in volumes and pricing. Apart from the above, BEL, Timken, Escorts, BHEL, and Divi’s Labs indicate solid momentum and order visibility.
Among Infrastructure plays, Larsen & Toubro and Bharat Forge stand out, while Jindal Steel and JSW Steel continue to lead the Metals space. These names could remain key outperformers in the short to medium term.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)