F&O Talk | Nifty holds 100-day EMA: Breather before rally or calm before the storm? Sudeep Shah answers

Indian equity markets staged a mild rebound after several sessions of decline, buoyed by strong gains in select IT and banking stocks on the back of positive earnings surprises. The uptick underscored the resilience of domestic financials, even as global headwinds, particularly geopolitical and trade-related uncertainties, persisted in the backdrop.The recovery was primarily fueled by heavyweight IT counters, which rallied following robust quarterly results. This helped offset lingering concerns over potential U.S. tariff actions, including secondary sanctions tied to trade with Russia and Iran. While such trade risks continue to loom, their market impact has been relatively contained.Ongoing domestic institutional buying has played a stabilising role, mitigating the effect of moderate FII withdrawals. Despite a cautious outlook for export-driven sectors, resilient domestic consumption, consistent services sector growth, and increased trade diversification continue to lend support to the broader economic landscape.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:What is your overall view on markets?After scaling a fresh all-time high of 26373 on January 5, the benchmark index Nifty has slipped into a corrective phase. The decline, however, has found support near the 100-day EMA, a crucial technical level that has held firm over the last five trading sessions. Currently, the index is oscillating around this zone, indicating consolidation rather than panic selling. On the weekly chart, Nifty has formed a Doji candle, signalling indecisiveness among market participants—largely due to the upcoming Q3 results from heavyweight stocks such as Reliance Industries, HDFC Bank, and ICICI Bank. But is this pause merely a breather before the next big move—or the calm before a deeper storm?Technically, the 20-day EMA continues to slope downward, while the 50-day and 100-day EMAs remain flat, reflecting the absence of strong trend conviction. Momentum indicators mirror this indecision, with the daily RSI confined to a tight band of 38.55–42.84 for five consecutive sessions, pointing to muted momentum and a clear wait-and-watch approach among traders. Such prolonged compression in momentum often precedes a sharp move—but in which direction will it unfold?Looking ahead, earnings from index heavyweights are expected to be the key trigger for Nifty’s next directional leg. ⁠How does Nifty look? Does it indicate a clearer direction now? What are your key levels ?On the upside, the 20-day EMA zone of 25,900–25,950 will act as a crucial hurdle; a sustained move above 25,950 could spark a swift rebound towards 26,200, followed by 26,500 in the short term. On the downside, the 25,500–25,450 band remains a critical support area, with a decisive break below 25,450 potentially accelerating the correction.With the giants like RIL, HDFC Bank and ICICI Bank posting results after Friday's close, do you think the market is going to take a significant support as a trigger for any directional move?With heavyweight results from RIL, HDFC Bank and ICICI Bank due after Friday’s close, the market is likely to look at these outcomes as a potential trigger for the next directional move, especially given the current consolidation phase.While RIL and HDFC Bank have remained under pressure since early January, strong results from these heavyweights could improve market sentiment. However, any meaningful upside move would need to be validated by a strong follow-through in subsequent sessions to confirm a durable trend reversal.Specifically, after ICICI Bank and HDFC Bank's results, what would be your take on Bank Nifty? Are these results likely to create a big impact on the index?Bank Nifty continued its outperformance against the frontline indices for yet another week. While the broader market ended largely unchanged, the banking benchmark advanced 1.42%, reinforcing its relative strength. On the weekly chart, the index has formed a bullish candle accompanied by a minor lower shadow, indicating sustained buying interest at lower levels.The ratio chart of Bank Nifty versus Nifty has climbed to a 132 week high, highlighting a strong phase of outperformance. From a technical standpoint, the index remains firmly in an uptrend, supported by its position above key moving averages. Additionally, the daily RSI remains above 60 and is trending upward, underscoring bullish momentum.Looking ahead, Q3 earnings of heavyweights HDFC Bank and ICICI Bank, scheduled over the weekend, are expected to be crucial catalysts that may dictate the next directional move in the index.In terms of key levels, the zone 60,400–60,500 is likely to act as a significant resistance. A decisive close above 60,500 could trigger a sharp rally toward 61,200, with scope to extend further toward 62,000 in the near term. On the downside, the area 59,400–59,300 will serve as an immediate support zone for the index.What are your views on PSU Banks and their outperformance? Will the same continue going forward too?Nifty PSU Bank has given a consolidation breakout. We believe it is likely to continue its outperformance in the short term. ⁠Any specific views on RIL?After forming a negative RSI divergence on the daily chart, signalling a potential bearish reversal, the stock witnessed an upward sloping trendline breakdown and drifted lower. Momentum indicators continue to remain weak, with the ADX in a rising mode, indicating strengthening bearish momentum, while the MACD stays below both the signal line and the zero line. The RSI is on a declining trajectory and remains below the 35 mark, highlighting persistent weakness.However, the stock has shown signs of stability near its 200-day EMA, placed in the 1,445–1,440 zone and has managed to hold above this crucial support so far. A decisive breakdown below 1,440 could accelerate selling pressure. On the upside, a strong breakout above the 1,485–1,490 zone may trigger a pullback move in the stock.Within the IT pack, many Nifty 50 companies, like Infosys, TCS, Wipro and Tech Mahindra have reported their results. What is your take on the sector and your top picks?Within the IT pack, the overall sectoral setup has turned constructive, supported by improving relative strength and positive price action. The ratio line in Nifty IT / Nifty ratio chart has registered a fresh breakout above its previous high and is in a rising trajectory, signalling strong relative outperformance versus the benchmark. Price-wise, the Nifty IT index had been consolidating in the 38,737–37,366 range since the start of January and has decisively broken out of this range on 16th January, indicating a shift from consolidation to an expansion phase.From a momentum perspective, the Relative Rotational Graph (RRG) shows Nifty IT moving swiftly from the lagging quadrant into the improving quadrant, suggesting that momentum is gradually strengthening and the sector is positioning itself for potential leadership.On the stock-specific front, LTIM and Tech Mahindra have both given downward-sloping trendline breakouts on the daily chart. A sustained follow-through above current levels could lead to an extension of the pullback move in both the stocks. Meanwhile, HCL Tech has witnessed a horizontal trendline breakout, with the RSI in a rising mode, indicating strengthening bullish momentum.Overall, the technical structure points towards continued outperformance in the IT space, with HCL Tech, LTIM and Tech Mahindra emerging as the preferred picks for the short term.Other than IT, the metal sector has been shining lately. However, this week did witness some profit booking from higher levels. What's your take on the sector now? And which stocks are among your top recommendations?Despite some profit booking at higher levels, the metal sector continues to display strong relative strength and the broader trend remains intact.The Metal Index maintained its relative outperformance during the week, even as it briefly approached its 20-day EMA before witnessing a swift rebound and resuming its upward trajectory. On the Relative Rotational Graph (RRG), while the index is showing a mild downward rotation, it continues to remain in the leading quadrant, which indicates that relative strength and momentum are still firmly in place. Importantly, the index is trading above all key moving averages, and there are no clear signs of trend reversal at this stage. Hence, the metal index is likely to continue its upmove, although intermittent bouts of profit booking cannot be ruled out.From a stock-specific perspective, Vedanta remains in a strong uptrend and is well-positioned to extend gains. Tata Steel has broken above its previous swing high, suggesting scope for further upside in the coming sessions. National Aluminium has witnessed a sharp uptrend and continues to trade well above its key moving averages, indicating sustained bullish momentum.Overall, the metal space remains a preferred sector, with Vedanta, Tata Steel and Nationalum standing out as the preferred picks in the current setup.⁠With everything going on with Trump tariffs, what kind of impact do you see on the markets whenever our country settles on a trade deal with the US?The market impact of an India–US trade deal will largely hinge on how balanced and constructive the agreement is, rather than merely the announcement itself. For markets, it is crucial that the deal is not lopsided or overly favourable to the US, as unfair concessions could hurt domestic competitiveness. Prolonged uncertainty around Trump-era tariff policies has remained a key overhang, prompting FIIs to adopt a cautious stance toward Indian equities, particularly globally linked sectors. A fair and mutually beneficial trade agreement could significantly reduce policy uncertainty, improve earnings visibility for exporters such as IT, pharmaceuticals and manufacturing-linked segments, and reinforce India’s position as a credible global supply-chain alternative. Importantly, a constructive deal could help revive FII inflows, improving market liquidity. While such a development can act as a strong sentiment trigger, any meaningful upside will depend on clarity, reciprocity and follow-through, ensuring long-term benefits for India’s economic and market outlook.⁠Any sectors on your radar and key stocks to track going forward?From a technical perspective, PSU Banks, Private Banks, CPSE, Capital Market, IT, and Metal sectors are expected to extend their outperformance in the near term, supported by strong price structure and favourable momentum readings.On the other hand, Consumer Durables, Healthcare, Pharma, FMCG, India Tourism, Media, and Realty sectors are showing signs of sustained weakness and are likely to continue their short-term underperformance.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)