Nifty faces resistance below 26,000; PSU banks and metals offer better risk-reward, says Gautam Shah

Indian equity markets remain stuck in a consolidation phase, with the Nifty repeatedly failing to decisively cross the 26,200 level, even as global markets continue to trade near record highs. However, the broader market structure does not yet indicate a breakdown, according to Gautam Shah, Founder of Goldilocks Global Research.

Speaking to ET Now, Shah said the market has developed “cold feet” near the 26,200 mark after multiple failed breakout attempts over the past three months. Despite the lack of momentum, he views the current phase as consolidation rather than a bearish trend.

“The 25,450 level is extremely important for the Nifty. As long as the index holds above this support, there is a strong possibility of a rebound, especially with the Union Budget just days away,” Shah said. A decisive break below this level, however, would be concerning from a medium-term perspective, he added.


Shah noted that while sentiment remains weak—particularly in small- and micro-cap stocks—technical indicators suggest that risk-reward is gradually turning favourable for selective long positions. He advised investors to stay concentrated rather than over-diversified, focusing on sectors showing relative strength and reasonable valuations.

PSU banks still have room to run

Among sectors, Shah remains bullish on public sector banks, which have significantly outperformed private lenders over the past year. He highlighted that the PSU Banking Index has already met the 9,000 target outlined in earlier reports and may still see further upside.

“There are no signs of topping out yet. There could be another 2,000-point upside in the PSU banking index, led by the top four or five names,” Shah said, adding that valuations remain comfortable and under-ownership continues to support the theme.

Metals emerging as a multi-year trade

Shah also reiterated his bullish stance on metals, calling it one of the strongest emerging themes in both Indian and global markets. He pointed out that while fundamentals appeared weak six months ago, price action indicated a shift that is now being supported by improving fundamentals.

“Hard assets have been extremely exciting over the last six months. Our working target for the metals index is 12,000, but even 15,000 is achievable over the longer term,” he said. According to Shah, the rally is likely to broaden, with ferrous metals and steel producers expected to participate alongside base metals such as copper, aluminium and zinc.

He added that global cues are also supportive, noting that US metals and mining ETFs have been among the best performers in recent months.

Caution on FMCG and IT

In contrast, Shah remains cautious on FMCG and IT stocks. He said FMCG companies continue to trade at rich valuations, while clarity on a sustained consumption recovery is still lacking despite recent GST cuts.

“I would prefer to wait for a full quarter of results before taking a confident call on FMCG. The index has been among the worst performers, and valuations remain expensive,” he said.

Shah also maintained a negative outlook on Indian IT stocks, citing valuation concerns, AI-led disruption and better technology opportunities in global markets.

Overall, Shah believes that while Indian markets may be underperforming global peers for now, the phase is temporary. A budget-led trigger combined with strong global markets could help the Nifty regain momentum—provided key support levels remain intact.