F&O Talk | Nifty Crosses 100-DMA, But Consolidation Looms; Sudeep Shah Highlights 2 Rally Triggers
ETMarkets.com reports that the recent India–US tariff relief has positively influenced market dynamics, tempering volatility and boosting investor sentiment. However, analysts anticipate a range-bound trading environment with selective sector opportunities, particularly amidst ongoing concerns in the IT sector and Foreign Institutional Investors (FIIs).
Indian stock markets concluded the week robustly, propelled by the India-US trade agreement reached over the weekend. President Donald Trump’s executive order effectively nullified the additional 25% tariff on New Delhi’s Russian oil purchases and reduced reciprocal tariffs from 25% to 18%.
– Nifty Performance: The Nifty index snapped a two-week losing streak, closing above the critical 100-day moving average.
– Volatility Index: The India VIX declined sharply by 20% during the week, closing around 12, offering additional comfort to bullish traders.
Nifty’s Weekly Gains and Market Outlook
Analyst Sudeep Shah, Vice President and Head of Technical & Derivatives Research at SBI Securities, shared insights regarding the Nifty and Bank Nifty, along with strategies for the coming week.
– Weekly Gains: Nifty climbed 1.4%, buoyed by the India-US trade deal, ending just shy of 25,700.
– Volatility: The past week witnessed a dramatic 1,662-point swing in Nifty, reflecting its highest weekly movement since June 2024.
Technical Analysis for Nifty
– Consolidation Phase: Indicators suggest that Nifty may remain in a consolidation phase, oscillating within defined levels prior to a significant directional move.
– Key Support & Resistance Levels:
– Immediate support: 25,500–25,550
– Additional support: 25,200
– Critical resistance: 25,850–25,880 (A sustained move beyond this may lead to further upside towards 26,000 and 26,200).
Investment Insights for February
While February is traditionally a weaker month, the early performance has been surprisingly positive.
– Statistical Trends: Historical data shows that after the Budget, the Sensex closed positively 11 out of 15 times, averaging gains of 2.10%. Similarly, Nifty also had 12 positive closes with an average gain of 2.04%.
– Sector Performance:
– Pharmaceuticals: Strong performer, with positive week results 14 out of 15 times post-budget.
– Financial Services: Consistent performer, closing positively 11 times post-budget.
Bank Nifty Analysis
The Bank Nifty index recorded a new all-time high of 61,764, although it faced profit booking towards the week’s end.
– Current Position: Ended the week at 60,120, marking nearly 3% weekly gains.
– Moving Averages: Remains above crucial moving averages, suggesting medium-term resilience.
Key Levels for Bank Nifty
– Immediate Support: 59,500–59,600
– Resistance: 60,400–60,500 (A breakout above this range could lead towards 61,200 and possibly 62,000).
FII Activity and Currency Movements
– Market Dynamics: Although FIIs have turned net buyers, it’s too early to determine if this trend will sustain. A significant portion of the inflow followed the India-US trade announcement, indicating potential volatility ahead.
– INR Performance: The Indian Rupee saw its best weekly close in nearly three years, but a sustained decline in the dollar is necessary for durable emerging market inflows.
Sector-Specific Performance
IT Stocks
The Nifty IT index suffered a decline of over 6%.
– Technical Weakness: The index is now trading below key moving averages, indicating a potential double-top breakdown. A key target is near the 35,050–35,000 mark.
Defence Stocks
Despite a supportive budget, defence stocks have been lackluster.
– Resistance Zone: The 8,300–8,400 range remains a crucial resistance level, needed for any renewed buying interest.
Stock Performances and Recommendations
Star Performers: Apar Industries, Aarti Industries, and Nykaa demonstrated strong performance this week.
Lagging Stocks: BDL, Hindustan Copper, and GRSE showed weakness.
– Trading Strategy:
– Apar Industries: Strong resistance at 9,750–9,800; a breakout could lead to further gains.
– Aarti Industries: Maintain bullish stance above the 420–415 zone.
– Nykaa: Following its breakout, the stock shows potential for further upside.
Sector Outlook Moving Forward
Several sectors appear poised for outperformance, including:
– Nifty CPSE and Nifty Metals: Showing sustained momentum and favorable price structures.
Conclusion
As the Indian markets navigate through consolidation phases, traders and investors are advised to focus on specific sectors displaying strength and potential. With key indicators pointing towards selective opportunities, careful analysis and strategic investments will be crucial for capitalizing on upcoming market movements.