F&O Talk: Nifty Cracks 5% in 11 Days – Is This Just the Beginning of a Deeper Slide? Sudeep Shah Weighs In
Indian equity markets concluded the week on a subdued note, grappling with profit-booking, persistent foreign institutional investor (FII) outflows, and growing global trade concerns. The Nifty index experienced a significant decline of over 5% in just 11 trading sessions, marking one of its sharpest corrections recently. Here’s a comprehensive look at the current market scenario:
Market Overview
– Nifty Performance: Attempted to reclaim the 25,500 level but faced strong resistance, settling back near 25,200.
– Sectoral Trends:
– Heavyweights Under Pressure: Key stocks such as Reliance Industries dropped nearly 12%, HDFC Bank declined by 7.58%, and ITC plummeted by approximately 20%.
– Technical Indicators: The Nifty fell below its 200-day EMA for the first time since April 2025, forming a bearish candle on the weekly chart.
Key Insights from Sudeep Shah
Was the 5% Drop Inevitable?
– Contributing Factors: The correction stems from heavy selling in index heavyweight stocks. Analysts are concerned about whether this downturn signifies a deeper slide or simply a consolidation phase as traders await the upcoming Budget.
– Broad Market Impact: Nifty Midcap 100 and Nifty Smallcap 100 also suffered sharp declines, with both indices displaying pronounced bearish momentum.
Immediate Resistance and Support Levels
– Resistance Zone: The 25,400–25,450 range is expected to act as crucial resistance for Nifty.
– Support Levels: Immediate support is identified around 24,800, followed by 24,600.
Insights on Major Stocks
– Reliance Industries: Despite strong revenue growth in Q3, disappointing bottom-line results have hindered momentum. Technically, it has corrected 14% since January 5, indicating potential ongoing pressure.
– HDFC Bank: Demonstrated solid Q3 performance but failed to generate investor interest, hinting at market fatigue and a cautious environment.
– IndiGo: Shocked the markets with a staggering 77% drop in Q3 profits due to operational challenges, drawing concerns about the overall aviation sector.
Sector Analysis: Are PSUs the New Focus?
– PSU Bank Outperformance: With a notable rally of nearly 5%, PSU banks are positioning themselves as the stronger sector amid a backdrop of weaker private banks.
– FII Selling Pressure: Over Rs 30,000 crore has been withdrawn by FIIs this January. Historically, DIIs have absorbed significant selling pressure, potentially stabilizing the market.
Geopolitical and Domestic Earnings Signals
– Trump’s Trade Deal Comments: Recent positive signals regarding a potential trade deal with India provided a brief lift, although traders should weigh these geopolitical headlines against domestic earnings, which hold stronger implications for market trends.
Investment Strategy Ahead of the Budget
– Current Market State: The market appears trapped in the 25,000–25,500 range leading up to the Budget. Given the volatility, preserving cash and waiting for clearer directional signals post-announcement is advisable.
– Sectors for Caution: Realty, Consumer Durables, and Financial Services are expected to continue underperforming. In contrast, sectors such as IT and Metals are showing signs of relative strength.
Suggested Stocks for Traders
– Recommendations:
– Tech Mahindra
– HCL Technologies
– Hindustan Unilever
– Indian Bank
– JK Tyre
In conclusion, with the Nifty experiencing a notable 5% decline over the past 11 days, market participants are keenly observing whether this marks the onset of a more protracted downturn. As we await the Budget, it’s crucial to stay informed about both global geopolitical shifts and domestic earnings developments.