Indian benchmark indices Sensex and Nifty ended the week in positive territory, gaining up to 0.5%, even as broader markets witnessed a sharp sell-off amid mounting headwinds, including a surge in oil prices above $117 a barrel.
The Sensex rose 308 points to close near 74,460 on Friday, while the Nifty 50 advanced 116 points to settle at 23,053. In contrast, broader markets came under heavy selling pressure, with the Nifty Midcap 100 and Nifty Smallcap 250 indices declining up to 2%.
During October, the benchmark index Nifty traded within a narrow range of 731 points. However, beneath this relatively narrow trading band, the index witnessed heightened volatility throughout the month before managing to close above the crucial 23,000 mark. On the monthly chart, the index has formed a small-bodied candle with shadows on either side, reflecting indecisiveness among market participants. Notably, this formation has emerged following a strong bearish candle and in the vicinity of a crucial upward-sloping trendline support. Interestingly, this combination of technical signals could be hinting at a potential shift in the market's underlying dynamics.
Supporting this possibility, the recent price action suggests that selling pressure has eased considerably, with Nifty showing signs of establishing a base near an important support zone. The improving price structure is also evident on the lower timeframe. Nifty has reclaimed its 20-day EMA, which has now started edging higher. Meanwhile, the downward slopes of the 50-day and 100-day EMAs have flattened considerably, indicating a gradual improvement in the underlying trend. Adding to the positive momentum, the daily RSI has moved above the 50 mark and continues to trend higher. The convergence of these technical developments raises an important question: Is Nifty gearing up for a more meaningful recovery?
The improving technical setup strengthens our conviction that the benchmark index could extend its ongoing pullback rally over the next couple of trading sessions. From a trading perspective, the 22,800–22,750 zone will serve as an important support area, and holding above this band will be crucial to sustaining the recovery. On the upside, the 50-day EMA, placed in the 23,150–23,200 zone, is likely to act as the immediate hurdle. A decisive breakout above this resistance could change the near-term technical landscape and open up the next leg of recovery towards 23,500.
Nifty IT has been strongly outperforming the frontline indices since the last couple of trading sessions. Also, it is trading above its short and long-term moving averages. These averages are on a rising trajectory. Interestingly, the daily RSI is in the super bullish zone as per RSI range shift rules. Hence, we believe, it is likely to continue its upward journey in the short term.
For the second consecutive month, the broader market indices, Nifty Midcap 100 and Nifty Smallcap 100, ended in negative territory. However, both indices witnessed a meaningful pullback from lower levels during the last week and formed bearish candles with long lower shadows, indicating buying interest emerging at lower levels despite prevailing weakness.
Currently, both indices continue to trade below their key short-term and long-term moving averages, which remain in a downward trajectory, suggesting that the broader trend is still corrective in nature. Nevertheless, the recent recovery has significantly narrowed the gap between the indices and their short-term moving averages, hinting at an improvement in near-term sentiment. Momentum indicators and oscillators remain largely neutral and are pointing towards a phase of consolidation.
Going ahead, Nifty Midcap 100 is expected to find immediate support in the 56,500-56,400 zone. On the upside, the 20-day EMA region of 58,200-58,300 is likely to act as a crucial resistance zone. A decisive breakout above this hurdle could pave the way for a further advance towards the 59,300 level.
Similarly, for Nifty Smallcap 100, the immediate support is placed in the 18100-18000 zone. On the higher side, the 20-day EMA zone of 18,800-18,850 is expected to act as a key resistance area. A sustained move above this barrier may strengthen bullish momentum and trigger a further rally towards the 19,250 level in the near term.
Trent has been consolidating within a broad range of Rs 3,400–2,546 since late April, as seen on the weekly chart. The key moving averages have flattened, reflecting a lack of directional bias. Similarly, the ADX is moving sideways, indicating subdued trend strength and limited directional momentum. A decisive breakout on either side of the consolidation range will provide fresh directional cues.
Indigo has staged a sharp pullback of around 9% from its recent low of Rs 4,464 recorded on October 23. The stock has reclaimed its key short-term moving averages, namely the 20-day and 50-day EMAs, indicating an improvement in near-term sentiment. The 20-day EMA zone of Rs 4,760–4,750 is likely to act as immediate support. The positive momentum could extend further as long as the stock sustains above this support zone.
Equitas Bank witnessed a breakdown from its Rs 71–65 consolidation range on October 29, signalling a deterioration in the technical setup. The RSI is trending lower, indicating persistent bearish momentum. Additionally, the DI lines have widened, with DI- positioned well above DI+ on the ADX indicator, highlighting the increasing dominance of bears. The bearish bias is likely to persist as long as the stock trades below the Rs 63–65 resistance zone.
Meesho has been consolidating within a range of Rs 245–208 since late September. The ADX is declining, indicating subdued volatility and a lack of strong directional momentum. Additionally, the key moving averages have flattened, reflecting a sideways bias. A decisive breakout on either side of this range will be crucial in determining the stock's next directional move.
Technically, Nifty IT, Pharma and Healthcare continue to exhibit strong relative strength and are likely to sustain their outperformance in the short term.
Conversely, Nifty India Defence, Consumer Durables, Energy, Cement and Oil & Gas remain relatively weak on both price and momentum parameters and are expected to continue underperforming the broader market in the near term.
If you were to select 5-6 stocks that look good on the charts ahead of Diwali, what would they be?
Technically, TVS Motors, Coforge, HCL Tech, Tech Mahindra, ICICI Bank and Gland Pharma are looking good for the short term.