F&O Talk: Nifty looks weak on chart, says Sudeep Shah; outlines HDFC Bank, Bluestone Strategy after Q1

The Indian stock market extended losses for the fifth consecutive session, with Sensex and Nifty tumbling more than 1% intraday before paring most of the losses and closing 0.4% lower each on Friday as oil prices above $100 per barrel, FII selling and other factors spooked investors.

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, as well as an index strategy for the upcoming week. The following are the edited excerpts from his chat:

Nifty slipped over 2% this week, plunging in all five sessions. What is your view on Nifty going forward?

Last week, the benchmark Nifty index traded within a narrow range during the first two trading sessions. However, selling pressure intensified during the final three sessions, resulting in a sharp correction. Eventually, the index ended the week at 23,767 level, registering a decline of 2.33%. A sharp surge in Brent crude oil prices amid the escalation of the US-Iran conflict, coupled with a notable rise in the US 10-year bond yield, weighed heavily on investor sentiment across global markets. Amid this sharp deterioration in sentiment, Friday’s price action offered the first sign that the decline may be approaching a crucial juncture.

On Friday, the index found support near the 61.8% Fibonacci retracement level of its recent upward rally from 23,070 to 24,531 and staged a modest pullback. Consequently, the index formed a bearish candle with a small lower shadow on the weekly chart, indicating some buying interest at lower levels. Notably, Friday’s recovery was largely driven by strength in the large-cap space. While the Fibonacci support triggered a pullback, the momentum indicators tell a more cautious story beneath the surface.

From a technical perspective, the index is currently trading below its key short and long-term moving averages, while the 20-day and 50-day EMAs are trending lower, reflecting weakening momentum. The daily RSI is hovering around the 43 mark and remains below its 9-day average, indicating subdued momentum. Meanwhile, the MACD histogram continues to remain below the zero line, further reinforcing the prevailing bearish undertone. With momentum still tilted in favour of the bears, the battle now shifts to a crucial support zone that could determine the index’s next directional move.

Going ahead, the 23,650–23,600 zone will act as an important support area for the index. A sustained move below 23,600 could extend the correction towards 23,450, followed by the 23,300 level. On the upside, the 50-day EMA zone of 23,950–24,000 is likely to act as an important hurdle.

Rough week for bank stocks as the index declined over 3% this week. How are charts looking for Bank Nifty?

The Bank Nifty witnessed heightened volatility during the week. After scaling a high of 58,228, the index came under sharp selling pressure and underwent a meaningful correction. However, buying interest emerged near the 56,000 level, helping the index stage a strong recovery from lower levels. Despite the rebound, Bank Nifty ended the week around 56,700, registering a loss of more than 3%.

On Friday, the index briefly slipped below its crucial 200-day EMA, indicating weakness in the broader trend. However, it managed to recover and close above this long-term moving average, highlighting the importance of this support zone. Meanwhile, momentum indicators and oscillators are currently signalling a sideways to range-bound trend, suggesting a lack of strong directional momentum in the near term.Going forward, the 56,000-55,800 zone is expected to act as a key support area, as it coincides with the 50% Fibonacci retracement of the previous upward rally. A decisive and sustained breakdown below 55800 could trigger another round of selling pressure, paving the way for a sharper correction towards 55,000, followed by 54,400 in the short term.

On the upside, the 20-day EMA zone of 57,300-57,400 is likely to remain a significant resistance hurdle. Any pullback rally is expected to face supply pressure around this region, and a sustained move above it would be required to improve the near-term technical outlook.

What is the options data indicating about Nifty’s near-term trading range, and where are the key Call and Put positions building up ahead of the Monthly expiry?

The Put Call Ratio (PCR) slipped from 1.13 on July 17 to 0.68 on July 23 as bears attempted to gain the upper hand. Following the sharp pullback from 23,600 levels on July 24, the PCR improved to 0.83. Despite this recovery, call writers maintained dominance at the week’s close. Over the past four sessions, a steady rise in open interest alongside falling prices has signaled the buildup of short positions in index futures.

For context, Nifty had been consolidating within the 24,531–23,785 band for 28 sessions and the July 24 close below the lower end of this range confirmed a breakdown, raising concerns of further downside.

On the downside, the 23,600 strike carries significant put open interest, with put writing nearly eight times higher than call writing. This level is a crucial support zone, coinciding with the strong buying seen on July 24 after Nifty’s gap closed. Ahead of the monthly expiry, Nifty is most likely to hold this level, though any decisive breach could trigger put writers’ exit and accelerate near term weakness. On the upside, the 24,000 strike has notable call open interest, with call writing nearly three times higher than put writing, making it a strong resistance zone to watch as expiry approaches.

What are some stocks that are looking good for the week ahead?

Despite the broader market weakness, a few stocks continue to display strong relative strength and positive technical setups. HAL, Manappuram Finance, Titan, and United Spirits are currently looking promising and could remain in focus in the week ahead. Their resilient price structures and favorable momentum indicators suggest the potential for outperformance.

Can you share your outlook on Bluestone, HDFC Bank, Infosys, and IndusInd?

Bluestone delivered its strongest ever weekly close, surging nearly 29% following its quarterly results. The stock now trades comfortably above key short and long term moving averages, with a rising ADX signaling robust trend strength. The MACD’s expanding green histogram bars further reinforce bullish momentum. While a phase of healthy profit taking cannot be ruled out given RSI and ADX nearing peak levels, immediate support lies in the Rs 710–700 zone. The bullish bias is expected to persist as long as the stock holds above this zone.

HDFC Bank ended the week with a sharp 9% loss, recording lower closes across all five sessions. The stock trades well below its key moving averages and has closed below the lower band of the Bollinger Band for four consecutive days, a sign often associated with strong trends. RSI has slipped below 40, reflecting growing bearish momentum. The Rs 725–720 zone remains a critical support, and a decisive breach could trigger further weakness.

Infosys slipped over 5% for the week, closing below its key moving averages. The RSI continues to fall, indicating bearish momentum, while DI has crossed DI+ on the ADX with widening lines, underscoring strong seller control. The MACD line remains below the zero line on both daily and weekly charts, reinforcing the bearish bias. As long as the stock trades below the Rs 1,075–1,080 zone, weakness is likely to persist.

IndusInd Bank attempted a consolidation breakout on July 21 but failed to sustain higher levels, slipping below its 20 day EMA after quarterly results. RSI dropped sharply from 73 to 52, signaling loss of bullish momentum, while the MACD line crossing below the signal line points to building downside pressure. Unless the stock reclaims the Rs 1,045–1,050 zone, it is likely to remain under pressure.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)