F&O Talk: Nifty's 6% gains are strongest since February 2021. Is it pullback or trend-reversal?

Domestic markets ended the session on a strong note, extending their weekly uptrend after a brief pause on Thursday. Gains were driven by buying interest in banking, auto, and consumer stocks. The Nifty50 advanced 275 points, or 1%, to close at 24,050, while the BSE Sensex rose 918 points, or 1%, to settle at 77,550.

Meanwhile, the volatility gauge India VIX ended at 19, down by 8% from the last close.

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

Q: What a week this was for Nifty which gained 6% WoW on the back of ceasefire between Iran-Israel. The index has breached a crucial resistance zone of 24,000 so what levels do you see in the holiday-shortened next week?

The benchmark index Nifty witnessed a sharp pullback rally over the past week, ending above the 24,000 mark with a gain of 5.89%, its strongest weekly performance since February 2021. Sentiment improved significantly following the announcement of a two-week ceasefire between the US and Iran. From its recent swing low of 22182, the index rebounded sharply by over 1800 points, registering an impressive 8.19% recovery within just six trading sessions, but what’s even more compelling is where this strength is actually coming from.

This recovery has been accompanied by a notable improvement in market participation. Market breadth strengthened considerably, indicating broad-based buying interest across segments. The broader market indices outperformed the frontline indices, with both the Nifty Midcap 100 and Nifty Smallcap 100 surging over 7%, each forming a strong bullish candle, hinting that the real story may be unfolding beneath the surface of the headline indices.

From a technical standpoint, the Nifty has moved above its 20-day EMA, which has now started to trend higher. Meanwhile, the downward slope of the 50, 100, and 200-day EMAs has begun to flatten, signalling a potential shift in trend dynamics. Momentum indicators have also turned supportive, the daily RSI has rebounded to the 54 level and is trading above its 9-day average, while the MACD histogram reflects a pick-up in upside momentum but, the bigger question is whether this momentum has enough fuel to sustain further gains.

Going ahead, these technical developments suggest that the pullback rally could extend further, with the index likely to test 24300, followed by 24500 in the near term. On the downside, the zone of 23650–23600 is expected to act as crucial support.

Q: What levels will be important for Bank Nifty and how should one trade next week?

The banking benchmark index, Bank Nifty, has significantly outperformed the frontline indices over the past week, highlighting strong sectoral leadership. The index surged by an impressive 8.47% during the week, marking its highest weekly gain seen in the last couple of years.

On the weekly chart, this sharp upward move resulted in the formation of a large bullish candle, reflecting strong buying interest and a decisive rebound from lower levels. At present, the index is trading comfortably above its 20 day EMA, indicating a positive shift in short-term trend.

Momentum indicators also support the rebound. The daily Relative Strength Index (RSI) is currently placed at 53.91 and continues to trend higher, suggesting strengthening upside momentum and improving market breadth within the banking space.

Looking ahead, Bank Nifty is expected to extend its ongoing pullback rally and may test the levels of 56,700 in the near term, followed by 57500 if the positive momentum persists. On the downside, the 54,700–54,600 zone is likely to act as a crucial support area. Sustained holding above this range will be important to maintain the bullish bias.

Q: TCS reported decent Q4 earnings but the stock was hammered on Friday. What is your view on the stock and IT sector as a whole?

TCS witnessed a pullback of 11.22% from the lows of 2346 recorded on 30th March. However, post its Q4 earnings announcement, the stock saw profit booking, indicating that traders who had positioned ahead of the results chose to lock in gains. Despite this, the stock continues to hold above its key short-term moving average, the 20-day EMA. The RSI has seen a downtick from around the 58 mark, suggesting a pause in the pullback. The 2495–2490 zone is likely to act as immediate support, and any breach could lead to further weakness.

Similarly, the Nifty IT index pulled back 13% from the low of 28,288 recorded on 17th March. After approaching its 100-day EMA, the index has seen a pause in the rally. The RSI has moderated around the 60 level, indicating some cooling off. The 30,500–30,490 zone, which coincides with the 20-day EMA, is expected to act as immediate support. A breakdown below this level could trigger further downside in the index.

Q: Banking heavyweights like HDFC Bank and ICICI Bank will also declare their Q4 earnings this week. What is you view on them and do you have your own preferred stocks that could do wonders for the investors?

HDFC Bank and ICICI Bank have witnessed pullbacks of 10.5% and 11% respectively from their recent lows of 727 (30th March) and 726 (2nd April). This recovery mirrors the broader benchmark indices, which have also seen a similar rebound. Earlier, private banks were positioned in the lagging quadrant of the RRG (Relative Rotational Graph), indicating weak strength and momentum. However, the sector has now moved into the improving quadrant, signalling a return of momentum, even if relative strength is still building.

While Bank Nifty has hovered around its 20-day EMA for the past three sessions, ICICI Bank has formed a strong bullish candle, closing above its 50-day EMA. RSI for both stocks is trending higher, indicating improving bullish momentum. The 790–785 zone is likely to act as strong support for HDFC Bank, while 1280–1275 is expected to act as key support for ICICI Bank. As long as prices hold above these levels, the pullback is likely to extend further.

Apart from these heavyweights, Axis Bank and AU Small Finance Bank also appear well-positioned based on their positive price action structure and could outperform in the near term.

Q: Realty and auto stocks have been big takeaways this week with index returns of 10% and 13%, respectively. What could be the reason for this investor interest?

Nifty Realty has witnessed a sharp pullback of around 18.5% from its low of 639 recorded on 2nd April and has now closed above its 20- and 50-day EMAs on the daily chart. Similarly, Nifty Auto has rebounded nearly 13% from its low of 23,560 and is trading above key short and long-term moving averages, indicating improving strength.

A key driver behind this strong momentum in both rate-sensitive sectors has been the Reserve Bank of India maintaining the status quo on interest rates. Markets were anticipating a possible rate hike amid rising bond yields, inflation concerns due to elevated oil prices, and ongoing geopolitical tensions. The absence of a rate hike provided relief, triggering strong buying interest in these sectors.

From an RRG perspective, both sectors have transitioned from the lagging quadrant to the improving quadrant, indicating a revival in momentum. Technically, the 26,150–26,100 zone is expected to act as strong support for Nifty Auto, while 730–720 remains a key support for Nifty Realty. As long as these levels hold, the pullback in both indices is likely to extend further.

Q: Fear index India VIX has cooled this week but still remains in high teens. What should be the strategy to navigate this phase?

India VIX has declined sharply by nearly 35% from its high of 28.91 recorded on 30th March, signalling a meaningful shift in market sentiment. The index has slipped below its 50-day EMA for the first time since 12th February 2026, indicating a clear cooling-off in volatility after a prolonged phase of uncertainty.

This contraction in VIX is a positive for the bulls, and price action reflects improving confidence. Markets opened with a strong gap-up following the US–Iran ceasefire news and, more importantly, managed to sustain those gains despite minor profit booking on Thursday. This resilience suggests a steady improvement in risk appetite.

Since 2nd April, every intraday dip has been bought into—a clear shift from last month’s “sell-on-rise” behaviour to a more constructive “buy-on-dips” approach. From a strategy standpoint, traders should align with this shift and look to accumulate quality stocks on declines rather than chase rallies.

Technically, VIX may cool further, with 17.2 acting as immediate support, followed by 16. A sustained decline in volatility typically supports equities, and if the market holds recent gains, it could pave the way for an extended pullback rally in the Nifty 50 in the coming sessions.

Q: Ola, Adani Green and New India Assurance were among top gainers this week, while Jain Resource, Chennai Petroleum and Latent View have been big losers. What should investors do with them?

Ola Electric Mobility has witnessed a sharp pullback of nearly 81% in just seven sessions from its low of 22.5 recorded on 30th March. The move is backed by strong volumes and a rising MACD histogram, indicating sustained bullish momentum. The stock is likely to extend its upmove as long as it holds above 33.

Adani Green Energy has rallied 35% from its 24th March low of 801 and is now trading above key moving averages. RSI remains in an uptrend, signalling strength. As long as it sustains above 1020–1010, the pullback can extend further.

New India Assurance Company saw a strong 20% surge on Friday with robust volumes. A bullish DI+ crossover on ADX and rising RSI indicate strong buying interest. A follow-through move could extend the uptrend further.

On the losing side, Jain Resource Recycling has declined 11.7% from its recent high, with RSI trending lower and DI- dominating, signalling weakness. The stock is likely to remain under pressure below 445–450.

Chennai Petroleum Corporation is consolidating within the 1018–960 range. Flat RSI and ADX suggest a lack of momentum; a breakout will dictate the next move.

Latent View Analytics, after a sharp 19.5% pullback on 2nd April, has entered a consolidation phase between 305–289. A decisive breakout on either side will provide the next directional trigger.

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