Chartist Talk: Direction for Nifty 50 remains uncertain but Sudeep Shah bets on these top 5 stocks for next week

Sudeep Shah is the Head - Technical and Derivatives Research at SBI Securities

• Nifty 50 direction remains uncertain at this stage
• Bet on HCL Technologies, Punjab National Bank for next week
• Bullish view on AU Small Finance Bank, Federal Bank, Bank of India remains intact
• Technical factors reinforce likelihood of upside breakout in Nifty IT index in near term

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The 20-day EMA continues to slope lower, while the 50-day and 100-day EMAs are largely flat, underscoring the lack of strong directional conviction. Momentum indicators echo this uncertainty, said Sudeep Shah, the Head - Technical and Derivatives Research at SBI Securities in an interview to Moneycontrol.

He believes the current price structure supports the possibility of a significant breakout in the Nifty IT index in the near term.

Sudeep Shah is betting on HCL Technologies, and Punjab National Bank for next week. Further, he maintains bullish view on AU Small Finance Bank, Federal Bank and Bank of India remains intact, supported by both sectoral and stock-specific technical strength.

Do you expect the Nifty 50 to break out of its consolidation on the upside?

After posting a fresh all-time high of 26,373 on January 5, the Nifty has entered a corrective phase. Importantly, the decline has been arrested near the 100-day EMA — a key technical support that has held steadily for the past five trading sessions. The index is now hovering around this zone, suggesting consolidation rather than any signs of panic-driven selling.

On the weekly chart, Nifty has printed a Doji candle, reflecting growing indecision among market participants amid the ongoing Q3 earnings season. The key question now is whether this consolidation is simply a pause before the next move, or a precursor to a deeper correction.

From a technical perspective, the short-term trend remains subdued. The 20-day EMA continues to slope lower, while the 50-day and 100-day EMAs are largely flat, underscoring the lack of strong directional conviction. Momentum indicators echo this uncertainty, with the daily RSI trapped in a narrow range of 38.55–42.84 for five consecutive sessions — a clear sign of subdued momentum and a cautious, wait-and-watch stance among traders. Historically, such extended compression in momentum tends to precede a sharp directional breakout, though the direction remains uncertain at this stage.

Going forward, Q3 earnings from index heavyweights are likely to act as the primary catalyst for Nifty’s next directional move. On the upside, the 25,900–25,950 zone near the 20-day EMA will be an important resistance area; a sustained breakout above 25,950 could trigger a quick rebound towards 26,200, with 26,500 as the next short-term objective. Conversely, the 25,500–25,450 band remains a crucial support zone, and a decisive breakdown below 25,450 could open the door for a sharper phase of correction.

Given the improvement in momentum and technical indicators, do you see the Bank Nifty hitting a fresh record high next week?

Bank Nifty extended its streak of outperformance versus the frontline indices for another week. While the broader market remained largely flat, the banking index gained 1.42%, further strengthening its relative leadership. On the weekly timeframe, the index has formed a bullish candle with a small lower shadow, suggesting that buying interest continues to emerge on declines.

The Bank Nifty–Nifty ratio has moved to a 132-week high, clearly reflecting a phase of sustained outperformance. Structurally, the trend remains firmly positive, with the index trading comfortably above its key moving averages. Momentum indicators also remain supportive, as the daily RSI is holding above the 60 mark and continues to trend higher.

Looking ahead, the Q3 earnings announcements of key heavyweights HDFC Bank and ICICI Bank over the weekend are likely to act as important triggers and could shape the next leg of movement in the index.

From a levels perspective, the 60,400–60,500 zone is expected to act as a crucial resistance area. A convincing close above 60,500 could open the door for a swift move toward 61,200, with further upside potential toward 62,000 in the near term. On the downside, immediate support is placed in the 59,300–59,400 band.

Do you see the formation of a cup-and-handle pattern in Nifty IT on the daily chart? If so, does it indicate a potential significant breakout in the near term?

Yes, a cup and handle–like pattern is clearly visible on the daily chart of the Nifty IT index. The current price structure supports the possibility of a significant breakout in the near term. The index is trading comfortably above its key moving averages, indicating sustained strength, and the daily RSI is on the verge of crossing above the 60 level, which typically reflects improving momentum. Together, these factors reinforce the likelihood of an upside breakout in the near term.

What are your top two stock picks for next week?

HCL Technologies

HCL Technologies has delivered a downward-sloping trendline breakout on the daily chart, signalling a potential trend reversal. The stock found strong support near the confluence of its 50-day and 200-day EMAs on January 5 and has been steadily moving higher since then. Momentum indicators remain supportive, with RSI trending upward. Additionally, DI+ crossing above DI- on ADX suggests strengthening bullish strength.

The ratio line in Nifty IT/Nifty ratio has also broken above its previous high, indicating possible outperformance ahead, with the stock poised to lead the rally. Hence, we recommend accumulating the stock in the zone of Rs 1,700-1,690 with a stop-loss of Rs 1,630. On the upside, it is likely to test the level of Rs 1,850 in the short term.

Punjab National Bank

PNB has delivered a horizontal trendline resistance breakout on the daily chart, backed by a healthy rise in volumes. The Rs 127.5–128.5 zone, which earlier acted as a strong supply area, has now been decisively surpassed. Notably, the stock has closed above the upper Bollinger Band for two consecutive sessions, signalling strong momentum and aggressive buying interest, often seen in the early phase of a trending move.

ADX is steadily rising, indicating strengthening bullish trend strength. Additionally, the Nifty PSU Bank/Nifty ratio continues to move sharply higher, highlighting clear relative outperformance within the PSU banking space Hence, we recommend accumulating the stock in the zone of Rs 133-132 with a stop-loss of Rs 127. On the upside, it is likely to test the level of Rs 145 in the short term.

Are you maintaining a bullish view on AU Small Finance Bank, Federal Bank and Bank of India?

Yes, the bullish view on AU Small Finance Bank, Federal Bank and Bank of India remains intact, supported by both sectoral and stock-specific technical strength.

Both private banks and PSU banks are clearly outperforming the benchmark, as reflected by fresh breakouts and rising ratio line on their respective ratio charts versus the Nifty, indicating sustained relative strength.

Bank of India has witnessed a horizontal trendline breakout on the daily chart, backed by a rise in volumes. The stock is trading above its key moving averages, while the MACD remains above both the signal line and the zero line, confirming positive momentum. The price action and indicator setup suggest scope for continuation of the ongoing upmove.