Chartist Talk: Nifty 50, Nifty Auto signal more downside; bet on these 2 stocks next week, says Sudeep Shah

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

• Technical setup signals further downside in Nifty 50, Nifty Auto
• See 25,500–25,450 as immediate support
• Any rebound likely to encounter strong supply in 25,900–25,950 band, limiting recovery attempts
• Broader markets also showing signs of strain
• Bet on Ipca Laboratories, IDFC First Bank for next week
• Union Bank of India appears well-positioned to extend its ongoing uptrend
• Auto index likely to slide into period of consolidation for now

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From a technical standpoint, the damage in Nifty 50 appears meaningful and this evolving technical setup points to the possibility of further downside in the near term, said Sudeep Shah, the Head - Technical and Derivatives Research at SBI Securities in an interview to Moneycontrol.

Broader markets are also showing signs of strain. This widespread deterioration highlights a clear contraction in risk appetite, reinforcing the need for a cautious, defensive, and highly selective approach in the near term, he said.

Despite this weakness in frontline index, Sudeep Shah bets on Ipca Laboratories, and IDFC First Bank. "Ipca Labs has confirmed a clear horizontal trendline resistance breakout, supported by a strong follow-through move and a noticeable surge in volumes, underscoring genuine buying interest," he said.

Are you confident that bears will not easily give up control of the market, considering the bloodbath witnessed during the past week?

After registering a new all-time high at the start of the week, the Nifty witnessed a sharp change in character, reversing direction and closing the week with a steep decline of nearly 2.5%—its most pronounced weekly drop since September 2025.

What makes this move particularly noteworthy is the persistent supply pressure reflected in four consecutive gap-down openings, underscoring sustained selling interest. The bulk of the decline unfolded during the final two trading sessions, raising an important question: is this merely a routine correction, or the early signs of a deeper trend reversal?

From a technical standpoint, the damage appears meaningful. The index has confirmed a breakdown below the neckline of an Adam & Adam Double Top formation, a development that often signals a shift in market structure.

Adding to the weakness, Nifty has slipped decisively below both its 20-day and 50-day exponential moving averages. The 50-day EMA—an important support zone that had repeatedly cushioned declines since October 2025—has now been breached, increasing downside vulnerability.

The index is currently hovering near its 100-day EMA, while momentum indicators continue to deteriorate. The daily RSI has dropped below the 40 mark for the first time since September 2025 and remains in a downward trajectory, reflecting fading bullish momentum.

This evolving technical setup points to the possibility of further downside in the near term. On the support front, the 25,500–25,450 region stands out as the immediate cushion. A decisive break below 25,450 could accelerate selling pressure and drag the index towards the 25,200 zone. On the upside, any rebound is likely to encounter strong supply in the 25,900–25,950 band, limiting recovery attempts.

Importantly, the weakness is not confined to the frontline index. Broader markets are also showing signs of strain, with the Nifty Midcap 100 slipping below its 20-day and 50-day EMAs, while the Nifty Smallcap 100 continues to trade beneath all its key moving averages. This widespread deterioration highlights a clear contraction in risk appetite, reinforcing the need for a cautious, defensive, and highly selective approach in the near term.

Now that Bank Nifty has also joined the Nifty 50’s decline, do you observe a Dark Cloud Cover formation on the weekly charts? Do you see the possibility of Bank Nifty breaking below the 58,700–58,600 levels next week?

Despite ending the week with a decline of nearly 1.5%, Bank Nifty displayed relative resilience by outperforming the broader market, which witnessed a much sharper sell-off. That said, the weekly chart has started to flash early warning signs, with the formation of a Dark Cloud Cover pattern—often interpreted as a shift in near-term sentiment from optimism to caution.

The short-term technical structure has weakened further as the index slipped below its 20-day EMA. Momentum indicators are also losing steam: the daily RSI has dropped below its 9-day average and continues to trend lower, while the fast stochastic has crossed beneath the slow stochastic, suggesting diminishing upside momentum.

From a levels perspective, the 58,700–58,600 zone emerges as a crucial support, coinciding with the recent swing low. A decisive breakdown below 58,600 could open the door for a deeper retracement toward 58,000, and subsequently 57,500 in the short term. On the recovery side, the 59,700–59,800 region is likely to act as a stiff resistance, and only a convincing move above this band would restore bullish bias.

What are your top two stock picks for the coming week?

Ipca Laboratories

Ipca Laboratories had been facing stiff resistance in the Rs 1,520–1,550 zone, repeatedly failing to decisively break above this area since early February last year. Now, the stock has confirmed a clear horizontal trendline resistance breakout on the daily chart, supported by a strong follow-through move and a noticeable surge in volumes, underscoring genuine buying interest.

The DI+ crossing above DI– on the ADX points to strengthening bullish trend momentum. Bollinger Bands, which had been contracting, have now started to widen, signalling an expansion in volatility and the beginning of a fresh directional move. With the stock closing above the upper Bollinger Band for three consecutive sessions, Ipca Laboratories continues to display strong upside traction and a clearly bullish setup. Hence, we recommend accumulating the stock in the zone of Rs 1,575-1,565 with a stop-loss of Rs 1,520. On the upside, it is likely to test the level of Rs 1,680 in the short term.

IDFC First Bank

IDFC First Bank has been moving in a narrow consolidation band of Rs 83–87 since December 19. Despite this prolonged sideways phase, the stock has comfortably remained above its 20-day EMA, which has emerged as a strong dynamic support. Additionally, the middle Bollinger Band has consistently cushioned declines, reflecting steady buying interest on minor dips.

On a relative performance basis, the IDFC First Bank–Nifty ratio chart has witnessed a decisive breakout from its consolidation zone, signalling the likelihood of upcoming outperformance against the broader market. Momentum indicators further support this view, with the RSI trending upward and suggesting gradual strengthening in price momentum.

Given this constructive setup, the stock appears well-positioned for a potential upside breakout. We recommend accumulating IDFC First Bank in the Rs 86–84 range, keeping a stop-loss at Rs 82. On the upside, the stock has the potential to move towards Rs 90 level in the near term.

Do you think National Aluminium Company and Ashok Leyland are currently looking overbought?

National Aluminium and Ashok Leyland continue to trade within well-defined uptrends, supported by sustained strength in the Metals and Auto sectors, both of which are maintaining higher-high, higher-low structures. On the daily charts, both stocks are positioned firmly above their key moving averages, reflecting strong underlying momentum and a constructive price setup.

However, momentum indicators are flashing signs of near-term overheating. RSI levels hovering around 74 indicate overbought conditions, while elevated ADX readings above 60 point to an exceptionally strong trend that may be approaching a maturity phase. As a result, the risk of short-term consolidation or profit-taking has increased following the recent sharp upmove.

Do you see a continuation of the rally in AU Small Finance Bank and Union Bank of India?

Union Bank of India appears well-positioned to extend its ongoing uptrend. The stock has confirmed a breakout above a falling trendline on the daily chart, supported by strong volumes — a clear sign of conviction behind the move. The ADX is trending higher, indicating strengthening trend momentum, while the MACD remains comfortably above both its signal line and the zero line, keeping the bullish bias intact. After a brief consolidation over the past two sessions, a sustained move beyond the Rs 165–167 zone could act as a trigger for the next phase of the rally.

AU Small Finance Bank, after a sharp advance, has entered a healthy consolidation phase. The stock continues to trade above its 20-day EMA, which is providing reliable dynamic support. With both ADX and MACD flattening out, the price action suggests consolidation rather than any meaningful reversal. As long as the stock holds above the 20-day EMA, a breakout past the Rs 1,025 level could open the door for further upside.

Are you maintaining a bullish view on the Nifty Auto index?

After the sharp upside rally, the Nifty Auto has formed a Dark Cloud Cover candlestick pattern on a weekly scale, which is clearly suggesting bearish sentiment. Also, the index has slipped below its 20-day EMA level and the daily RSI is slipped in sideways zone.

Hence, we believe, the Auto index is likely to slide into the period of consolidation for now.