Nifty’s technical crossroads
The benchmark Nifty index is trapped in a tight range, with technical indicators pointing to continued consolidation. Bhosale identifies 25,350 to 25,300 as the “key support” zone, significant due to multiple technical factors.
“This support coincides around 200 DMA and also there was a bullish gap left post the US-India trade talks,” Bhosale explains, highlighting how the 200-day moving average aligns with gap support from the recent trade announcement rally.
The 25,200-25,300 range represents the immediate floor, but markets remain in an “uncertain zone.” Upside resistance sits at 25,700-25,800, creating a 400-500 point trading band.
IT weakness weighs on sentiment
Last week’s market pressure stemmed from IT sector weakness, with concerns about global growth, currency headwinds, and valuations creating drag. Monday’s session showed resilience as markets bounced from 25,350 support, suggesting buyers are defending critical technical levels.
Sectoral divergence: Banking and PSUs shine
While the headline index struggles, significant outperformance is emerging in select sectors. “Individual spaces are doing very well like banking space is there, public sector space is doing well,” Bhosale notes, emphasizing the importance of focusing on areas showing “relative strength.”
This divergence is typical of consolidation phases, where leadership rotates and stock-specific opportunities emerge even as the index treads water.
Banking sector: The new market leader
The banking sector’s recent strength marks a notable shift in market leadership. After a prolonged period where technology stocks dominated, the rotation into financials suggests investors are repositioning toward value and stability. Banks benefit from stable margins, improving asset quality, and economic growth expectations. The sector’s defensive characteristics make it attractive during uncertainty.
Public Sector Undertakings: Momentum continues
Public sector stocks have emerged as surprise performers, with government-owned enterprises attracting investor interest. This strength reflects optimism about government spending, asset monetization plans, and operational improvements at state-owned companies. Many PSUs trade at significant discounts to private peers despite improving fundamentals.
HDFC Bank: Technical setup points to 8% upside
Among banking stocks, Bhosale highlights HDFC Bank as presenting a compelling risk-reward opportunity based on technical analysis. The stock is “forming a double bottom on its crucial weekly 89 EMA,” a pattern that typically indicates exhaustion of selling pressure and potential reversal.
Key technical indicators
Double bottom formation: This classic reversal pattern occurs when a stock tests a support level twice and fails to break lower, suggesting strong buying interest at that price. For HDFC Bank, this pattern is forming at the strategically important 89-period Exponential Moving Average on the weekly chart.
Positive RSI divergence: The Relative Strength Index is showing “positive divergence,” meaning that while the stock price may have made lower lows, the RSI indicator is making higher lows. This divergence often precedes upward reversals as it indicates weakening downward momentum.
Bullish Engulfing Pattern: Monday’s session produced a “strong bullish engulfing pattern,” where the day’s price action completely encompasses the previous session’s range with a higher close. This candlestick pattern signals a shift in sentiment from bearish to bullish.
Trade parameters:
Entry: Current market price
Stop Loss: 900
Target: 975 (approximately 8% upside potential)
Risk-Reward Ratio: Favourable, depending on entry price
The combination of multiple technical confirmations—pattern formation, momentum indicators, and candlestick signals—strengthens the conviction in this trade setup.
NTPC: Riding the PSU wave higher
From the public sector universe, Bhosale recommends NTPC, India’s largest power company, which is displaying strong technical momentum.
Technical analysis:
- Weekly breakout: NTPC achieved a “strong weekly breakout,” indicating a decisive move above significant resistance. Weekly breakouts tend to have greater sustainability than daily breakouts.
- Successful retest: Following the breakout, profit booking pushed prices back toward breakout levels. The subsequent “resumption of up move” confirms the breakout’s validity.
- Fresh Long formations: Indicators show “fresh long formations,” suggesting new buying interest that typically fuels continued upward movement.
Trade parameters:
Entry: Current market price
Stop loss: 362
Target: 383 (approximately 5.8% upside)
Risk-reward: Tight stop loss provides asymmetric risk-reward
The power sector backdrop remains constructive, with rising electricity demand and renewable energy transition creating growth avenues for NTPC.
Navigating the consolidation phase
For investors navigating the current market:
- Respect the range: With Nifty bounded by 25,300 support and 25,700-25,800 resistance, range-trading strategies may prove more effective than directional bets.
- Focus on relative strength: Concentrate capital in sectors showing clear momentum—currently banking and PSU stocks.
- Use technical levels: Identified support and resistance zones provide natural reference points for risk management.
- Monitor sector rotation: The shift from IT to banking and PSU stocks suggests an evolving market narrative favoring value and domestic cyclicals.
The broader context
The current consolidation follows a rally driven by US-India trade developments. The 200-day moving average at current support levels represents a critical long-term trend indicator. As long as Nifty holds above this average, the broader uptrend remains intact. A break below 25,300, however, could trigger technical selling and deeper corrections.
Looking ahead
Market participants will watch whether Nifty can defend the 25,350-25,300 support zone or break above 25,700-25,800 resistance. Until a breakout materializes, selective stock-picking in banking and PSUs offers compelling opportunities.
The technical setups in HDFC Bank and NTPC exemplify risk-defined opportunities in the current environment—stocks with clear catalysts, strong relative performance, and well-defined parameters for entry, exit, and risk management. Traders should maintain strict risk management, never risking more than a small percentage of capital on any single trade.