The sharp rally in Indian equities lost momentum on Friday, with the Sensex and Nifty slipping deep into the red and snapping a five-session winning streak, as heavy selling in IT stocks, weak global cues, and other headwinds weighed on investor sentiment.
Sensex tumbled 607 points to close at 76,802.90, while Nifty 50 declined 155 points to end the session at 24,013.10. This came after the benchmark indices jumped up to 5% over the past five sessions.
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:
Nifty staged a positive week, up over a percent and gaining in 4 out of 5 sessions. How is next week poised?
Last week, the benchmark index Nifty commenced the week on a strong footing with a sharp upside gap opening. Thereafter, the index gradually extended its gains and, on Thursday, closed above its 100-day EMA for the first time since February 2026, indicating an improvement in short-term sentiment. However, on Friday, the index witnessed a gap-down opening. Despite the late weakness, the index managed to conclude the week near the 24,000 mark, registering a gain of 1.65%. Interestingly, while the index ended the week in positive territory, the weekly price structure suggests that the market is still searching for its next directional cue.
Most notably, Nifty formed a Doji candle on the weekly chart, reflecting indecision among market participants. The formation suggests that neither bulls nor bears have been able to establish clear dominance at current levels. Despite the uncertainty in the frontline index, the broader market is exhibiting far greater conviction, with both Midcap and Smallcap indices significantly outperforming and maintaining strong bullish momentum. This divergence between the benchmark and the broader market could hold important clues about where the next leadership is emerging.
Coming back to Nifty, the broader undertone remains constructive as the index continues to trade above its 20-day and 50-day EMA. In addition, the daily RSI is placed at 58 and remains above its 9-day moving average, indicating that positive momentum is still intact despite the recent consolidation. The sustainability of this bullish setup now hinges on the index's ability to protect a crucial support zone.
On the downside, the 23,850-23,800 zone is expected to provide immediate support, as it coincides with the 50-day EMA and the 50% Fibonacci retracement level of the recent upmove. A decisive breach below 23,800 could intensify selling pressure and drag the index towards the next key support at 23,500. While the downside levels are clearly defined, the real test for the bulls lies at a much more critical hurdle overhead.
On the upside, the 24,150-24,200 zone, which aligns with the 100-day EMA, is likely to act as an immediate hurdle. A sustained move above 24,200 would strengthen bullish sentiment and could trigger a fresh rally towards the 24,500 mark in the short term.
IT witnessed a massive bloodbath on Friday, reversing the previous 3-4 sessions' gains. How are charts looking?
The Nifty IT Index witnessed a sharp sell-off on Friday, plunging over 5% and erasing the gains accumulated over the previous few sessions. The decline was triggered by Accenture’s weaker revenue growth guidance and cautious commentary on global technology spending. Although the index recovered from intraday lows and managed to close above its previous swing low of 27,078, the broader technical setup remains weak.
The index continues to trade below its key short- and long-term moving averages, while the RSI has slipped below 40, indicating bearish momentum. Additionally, DI- has crossed above DI+ on the ADX indicator, reflecting growing seller dominance. The 27,050–27,000 zone remains a crucial support zone. Any sustainable move below this zone can lead Index extending its weakness further on the downside. The resistance is placed in the 28,250–28,300 zone.
It was a good week for Bank Nifty. What should be the strategy for traders?
For the third consecutive week, the banking benchmark index Bank Nifty ended on a positive note, continuing its strong outperformance against the frontline indices over the past couple of weeks. However, on the weekly chart, it has formed a Doji candle, indicating indecisiveness at current levels despite the ongoing uptrend.
On the technical front, the index is comfortably trading above both its short-term and long-term moving averages, which are gradually trending higher. Notably, all the constituent stocks within the index are also trading above their 20-day and 50-day EMA levels, reinforcing the overall strength in the banking space.
Momentum indicators continue to support the bullish setup. The daily RSI remains in bullish territory, signaling sustained buying interest. Additionally, the MACD remains positive as it trades above both its zero line and signal line, while the histogram reflects strong bullish momentum.
Going ahead, the zone of 58,000–58,200 will act as an immediate hurdle for the index. A sustainable move above 58,200 could trigger a sharp upside rally towards 59,000, followed by 59,600. On the downside, the 57,100–57,000 zone is expected to act as a key support level for the index.
Is fresh money coming into long positions, or are we simply seeing short covering?
A closer look at the FII long-short ratio over the past two weeks suggests that foreign investors have been gradually covering their bearish bets in index futures. The long ratio improved from 7.58% on June 8 to 12.95% on June 19, while net short index futures positions declined from 2,77,614 contracts to 2,26,423 contracts. This clearly indicates a phase of short covering rather than fresh bearish additions.
The trend becomes even more evident when viewed alongside futures open interest data. During the same period, open interest declined by 9.66% while the Nifty gained 3.81%, a classic sign of short covering. While derivative data offers valuable insights, investors should always place greater emphasis on price action and use FII positioning as a supporting indicator rather than a standalone signal.
From a technical perspective, the Nifty witnessed a strong rebound after finding support near the 61.8% Fibonacci retracement of its prior upmove on June 8. Since then, the index has moved higher and continues to trade above its key short- and long-term moving averages, reflecting a positive undertone.
What's your strategy for Infosys, Yes Bank, IFCI, Paras Defence, and Vedanta?
Infosys has slipped below its prior swing low of Rs 1,089 on the daily chart, indicating a deterioration in price structure. The RSI has moved below the 40 mark, signalling strengthening bearish momentum, while the widening gap between DI- and DI+ on the ADX indicator reflects clear seller dominance. The Rs 1,085–1,090 zone is likely to act as an immediate resistance, and the trend is expected to remain weak as long as the stock trades below this hurdle.
IFCI recently gave a breakout above a downward-sloping trendline on the weekly chart. The RSI has also broken above its own trendline resistance on the weekly timeframe, highlighting improving momentum. The stock continues to maintain a higher high–higher low structure on the daily chart and trades above its key short- and long-term moving averages. As long as it sustains above the Rs 70–71 zone, the bullish outlook remains intact.
Paras Defence has given a decisive horizontal trendline breakout on the weekly chart, followed by a strong follow-through rally. The rising ADX on both the daily and weekly timeframes points towards strengthening trend momentum, while the RSI has broken above a downward-sloping trendline, reinforcing the bullish setup. The stock is likely to maintain its positive bias as long as it holds above the Rs 1,300–1,310 support zone.
Vedanta has been consolidating within a broad Rs 293–318 range since June 8, indicating a lack of directional conviction. The stock has slipped below its 20-day and 50-day EMAs, suggesting short-term weakness. Additionally, the falling ADX points to an absence of strong trend strength and declining directional volatility. The level of Rs 293 remains a crucial support to watch. A decisive breakdown below this level could trigger a fresh round of selling pressure and pave the way for further downside. Until a breakout from the current range occurs, traders may prefer to remain cautious.
What are stocks that are looking good on the charts for next week?
From a technical standpoint, the following stocks are showing constructive setups and could be worth tracking: CDSL, Olectra Greentech, JBM Auto, Eternal, AIA Engineering, AU Small Finance Bank, Cera Sanitaryware and Gabriel India.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
