Nifty: Oversold Nifty may see a technical bounce: Analysts

After a 16% correction over the past five months, both momentum and sentiment indicators have reached oversold levels. As a result, a technical bounce from the key support zone of 21,800–21,500 cannot be ruled out, according to technical analysts. Stocks like HDFC Bank, Bajaj Finance, Hindalco, Ashok Leyland, NTPC, BEL, Chola Finance, JSW Energy, Narayana Hrudayalaya, and SBI Cards look promising on the charts, with potential returns of 5–8%, analysts said.

DHARMESH SHAH
HEAD OF TECHNICAL, ICICI SECURITIES

Where is the Nifty headed?
The equity benchmark continued its losing streak over the third consecutive week, tracking global volatility amid tariff-related ambiguity. The lack of follow-through strength above the previous week’s high signifies a continuation of corrective bias. However, investors should note that with 16% corrections over the past five months, the momentum and sentiment indicators have approached oversold conditions. Hence, the possibility of a technical bounce cannot be ruled out from the key support zone of 21,800-21,500. However, to pause the downward momentum, the index needs to witness a sharp reversal and decisively close above the earlier support of 22,800 which would act as key resistance. Eventually, we expect the index to undergo base formation over the next couple of weeks. What should investors do?
We expect volatility to remain elevated, tracking further clarity on tariffs. However, looking at the oversold conditions, we advise traders to refrain from creating aggressive short positions. Focus on accumulating quality stocks (backed by strong earnings) in a staggered manner. On the sectoral front, banking, NBFC, power, consumer discretionary, and metal would be in focus. On the stock front, in large-cap, we prefer HDFC Bank, Bajaj Finance, Hindalco, Ashok Leyland, NTPC, and BEL for 5%, while in midcaps Chola Finance, JSW Energy, Narayana Hrudayalaya, SBI Cards, Piramal Pharma, and Bluestar look good for 7-8% gains.

TANMAY SHAH
RESEARCH HEAD, SIHLWhere is the Nifty headed?
The Nifty, having already discounted the high valuations, is now facing pressure from global factors, particularly the imposition of tariffs, which are dampening sentiment, especially in internationally-exposed sectors, which continue to weigh heavily on the index. In the near term, the Nifty is expected to trade sideways to negative, with strong support at 21,950, while if it closes above 22,450, it will bring the index closer towards 22,700-22,850 levels. Given the lack of clarity surrounding tariffs, investors should focus on companies with strong domestic exposure or minimal international dependencies and avoid sectors like IT with strong export dependency. What should investors do?
In the current market setup, a systematic investment plan remains a prudent strategy amidst volatility. Focus on a sector-specifi c investment strategy that mitigates global uncertainties. Sectors that remain relatively insulated from tariff implications include banking, NBFCs, and infrastructure. In the large-cap space, stocks like Coal India, Bajaj Finance, Kotak Bank, and InterGlobe Aviation stand out. While high valuations make the mid and small-cap space more cautious, in the mid-cap sector, UPL, Indian Hotels, and LIC Housing look promising, while Aarti Pharmalabs and J Kumar Infra are attractive in the small-cap space.

SUDEEP SHAH
HEAD-TECHNICAL & DERIVATIVE RESEARCH DESK, SBI SECURITIES

Where is the Nifty headed?
On the technical front, Nifty has been trading decisively below its 50-week exponential moving average (EMA) for the third straight week, reinforcing the bearish sentiment. Both the 20 and 50-week EMAs have started edging lower, while the upward slope of the 100 and 200-week EMAs has slowed down significantly, reflecting diminishing long-term strength. Given the current chart structure, a sharp V-shaped recovery looks unlikely. Instead, for a sustainable reversal, the index needs to establish a strong base near critical support levels.

What should investors do?
The 22,000-21,900 zone will act as crucial support. If the index slips below 21,900, then it is likely to test 21,500, and then 21,100 in the short term. On the upside, if it sustains above 22,700, then we may witness a short-covering rally up to 23,300, followed by 23,600 in the short-term. A stock-specific approach is the only way to navigate the volatility. The current capitulation phase presents a strong opportunity for longterm investors to accumulate quality large-caps and mid-caps at attractive prices. Traders should focus on the banking and financial space, which can show resilience.