settled at 24,718, while the Sensex ended at 81,118 — both marking a sharp pullback from their recent peaks.Amid this broader market weakness, select smallcap stocks managed to buck the trend. Several counters across sectors like electricals, IT, finance, and construction materials posted sharp gains, delivering weekly returns of 20–28%. These pockets of strength stood out as investors selectively chased momentum despite the overall risk-off mood.
With this, Analyst
Sudeep Shah, Deputy Vice President and Head of Technical & Derivatives Research,
SBI Securities interacted with ET Markets regarding the outlook on
Nifty and Bank Nifty along with an index strategy for the upcoming week. Following are the edited excerpts from his chat:
As the Iran–Israel conflict unfolds, global markets have entered a risk-off mode. Investors are responding to fears of broader geopolitical escalation across the Middle East. Crude oil prices have surged above their 200-day EMA level for the first time since January 2025, raising concerns about inflation and supply disruptions. Equities across the U.S., Europe, and Asia have seen sharp declines, while safe-haven assets like gold are gaining strength, and they are likely to test all-time high levels. Bond yields have also moved higher, reflecting heightened uncertainty. Volatility is expected to remain elevated in the short term, with sentiment driven largely by geopolitical headlines. Until clarity emerges, markets are likely to remain nervous and defensive.
In the first three trading sessions of the week, the benchmark index Nifty hovered near its 8-month high, yet remained confined within a narrow range of just 167 points. This tight consolidation reflected a clear state of indecision and a lack of strong conviction among market participants, as neither bulls nor bears were willing to take aggressive positions.However, the calm broke on the weekly expiry day, when the index slipped below the consolidation zone, triggering a sharp intraday correction. The downside momentum intensified further on Friday after news reports confirmed that Israel had conducted airstrikes on Iran. This unexpected geopolitical escalation spooked investors and led to a broad-based sell-off across global markets, including a steep gap-down opening in our market.Amid the global selloff, Nifty once again found support in the 24500–24450 zone — a crucial level that has acted as a reliable cushion multiple times over the past 23 trading sessions. Staying true to recent patterns, the index staged a strong rebound from this zone, recovering more than 240 points intraday and managing to close above the 24700 mark. This recovery, though impressive, was not strong enough to decisively shift the trend, especially with external risks still looming.
Despite the bounce, the index continues to trade below its 20-day EMA, and the daily RSI remains directionless in a sideways range, indicating a lack of strong momentum on either side. The overall chart structure suggests that the market is currently positioned in “no-man’s land” — stuck between key support and resistance levels, making directional conviction difficult. Given the heightened geopolitical uncertainty and muted technical indicators, caution is key. Traders are advised to adopt a wait-and-watch approach in the next couple of sessions until a clear breakout or breakdown confirms the next leg of the move.
Talking about crucial levels, 24500-24450 will act as crucial support for the index. If the index slips below the level of 24450, then the next important support is placed at the 24200 level. While on the upside, the zone of 24850-24900 will act as an immediate hurdle for the index. If the index sustains above 24900, then it is likely to resume its northward journey. In that case, it is likely to test the level of 25200, followed by 25500 in the short term.
The banking benchmark index, Bank Nifty, registered a fresh all-time high of 57049, but has since started forming lower highs and lower lows on the daily chart. This price action has resulted in a Bearish Engulfing pattern on the weekly chart—typically a bearish reversal signal that appears after an uptrend.
Adding to the cautious outlook, the index has slipped below its 20-day EMA for the first time since May 9, 2025. Moreover, the daily RSI has given a bearish crossover and is trending lower, indicating limited upside potential in the near term.
Going ahead, the 55100–55000 zone will serve as immediate support. A breakdown below 55000 could open the door for a further decline towards the 54400 level. On the upside, the 20-day EMA zone of 55700–55800 will act as a key resistance area.
If the Iran–Israel conflict escalates further, several sectors could face significant pressure.
Oil Marketing Companies like IOC, BPCL, and HPCL may see margin erosion due to rising crude prices, as retail fuel prices are often regulated. Airlines and logistics firms could suffer from increased fuel costs, impacting profitability. The auto sector might experience reduced consumer demand and higher input costs. FMCG and chemical companies could also feel the pinch from costlier transportation and packaging. Additionally, the cement and infrastructure sectors, being energy-intensive, may face margin compression. Overall, sectors with high fuel dependency and price sensitivity are most vulnerable in this scenario.
The defence sector stands to benefit amid rising global tensions like the Iran–Israel conflict. Increased geopolitical risks often lead to higher government spending on defence and security.
Technically, the Nifty India Defence index has taken support near its 20-day EMA level and thereafter witnessed a smart rebound. The daily RSI has taken support near the 60 mark and witnessed a bounce, which is a bullish sign as per RSI range shift rules. Hence, we believe that the defence space is likely to outperform in the short term.
With Brent crude surging due to the Iran–Israel conflict, the outlook for OMCs like IOC, BPCL, and HPCL turns negative in the near term. Rising crude prices squeeze marketing margins, especially when retail fuel prices aren’t revised due to political sensitivity. This can significantly impact profitability. Unless there's a pullback in crude or fuel price adjustments are made, OMCs may continue to underperform.
Aviation stocks are likely to face near-term pressure due to rising crude prices, which drive up costs and hurt margins. The Iran–Israel conflict adds geopolitical risk, while the tragic Air India incident may dampen sentiment and invite regulatory scrutiny. Overall, expect aviation stocks to underperform unless crude stabilises and sentiment recovers.
Nifty IT has significantly outperformed the frontline indices over the past week. The ratio chart of Nifty IT versus Nifty has broken out of a consolidation phase, reinforcing this outperformance. The index is currently hovering near its 200-day EMA, while the daily RSI remains in bullish territory. This setup suggests that outperformance is likely to continue in the coming sessions.
Beyond IT, both the Nifty Pharma and Healthcare sectors are also showing signs of relative strength and are expected to outperform in the near term.
On the other hand, Nifty FMCG has breached an upward-sloping trendline and slipped below key moving averages. Additionally, its daily RSI has dropped below the 40 level and continues to decline, indicating potential underperformance in the short term.
Technically, Max Health, HCL Tech,
Tech Mahindra, Glenmark, 360 One Wealth, and
Supreme Industries are looking good.
(: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
