Chartist Talk: Sudeep Shah flags deeper correction risk as Nifty breaks 61.8% Fibonacci level; suggests two stocks

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

• Given current chart structure and weak momentum, any near term rebound likely to attract fresh selling interest
• 22,850–22,800 zone likely to act as immediate support area for Nifty 50
• On upside, 23,450–23,500 range expected to act as immediate resistance zone

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The Nifty 50 closed below the crucial 61.8% Fibonacci retracement level of its previous rally from 21,743 to the all-time high of 26,373. A break below such an important retracement level often implies that the market could require additional time to establish a durable bottom, said Sudeep Shah, the Head - Technical and Derivatives Research at SBI Securities, in an interview with Moneycontrol.

According to him, momentum indicators also confirm the bearish bias, with the weekly RSI slipping to 30.43, its lowest reading since the COVID-19 market crash. This naturally raises the question of how much deeper the correction could extend, he said, adding the 22,850–22,800 zone is likely to act as the immediate support area for the Nifty 50, as a decisive break below 22,800 may trigger another leg of correction towards 22,500.

He suggests buying Aurobindo Pharma, and Coal India for next week. "Both stockks have broken their horizontal trendline on the daily chart," he said.

As Nifty is nearing a death cross, do you expect another 1,000-point fall from here?

The sell-off on Dalal Street extended into its third straight week, as escalating geopolitical tensions between the US and Iran continued to dampen investor confidence. The decline intensified during the last three trading sessions, with the benchmark Nifty index dropping more than 5% for the week, marking its steepest weekly decline since June 2022. Automobile and banking stocks were among the biggest drags on the index, contributing significantly to the market’s fall. However, the recent sharp correction cannot be attributed solely to geopolitical tensions.

A major factor adding pressure on the markets has been the heightened volatility in crude oil prices which closed above $100 a barrel. Yet, the deeper concern becomes more evident when examining the technical structure of the index.

From a technical standpoint, the Nifty continues to remain in a clear downtrend, with the pace of the decline accelerating in recent sessions. Over the past 27 trading sessions, the index has corrected by more than 12%, making it one of the most pronounced falls seen in recent times. Importantly, the index has been forming weekly candles with long upper shadows over the past two weeks, signalling that each upward move is being met with selling pressure. This behaviour indicates that investors are using rallies as opportunities to reduce exposure.

Moreover, the index has now closed below the crucial 61.8% Fibonacci retracement level of its previous rally from 21,743 to the all-time high of 26,373, highlighting a weakening technical setup. A break below such an important retracement level often implies that the market could require additional time to establish a durable bottom. Momentum indicators also confirm the bearish bias, with the weekly RSI slipping to 30.43, its lowest reading since the COVID-19 market crash. This naturally raises the question of how much deeper the correction could extend.

Looking ahead, the 22,850–22,800 zone is likely to act as the immediate support area for the index. A decisive break below 22,800 may trigger another leg of correction towards 22,500. On the upside, the 23,450–23,500 range is expected to act as an immediate resistance zone, where any short-term bounce could encounter fresh selling pressure.

Considering the oversold situation, what is the possibility of a sustained recovery in the market?

Given the current chart structure and weak momentum setup, any near term rebound, if it occurs, is likely to attract fresh selling interest, especially near resistance zones. Until the index shows signs of base formation, reduction in selling pressure, and improvement in momentum indicators, rebounds are expected to remain vulnerable.

After witnessing the biggest monthly fall since the Covid crash of 2020, will Bank Nifty decisively break the 53,000–52,000 zone next week?

The Bank Nifty, which represents the banking sector, has also undergone a notable correction in recent trading sessions and has clearly lagged the broader benchmark indices, indicating persistent selling pressure in major banking stocks.

Over the past week, the index has dropped close to 7%, and importantly, it has broken down from its rising channel on the weekly chart, suggesting that the medium-term trend has shifted from a phase of consolidation to one of weakness.

From its recent high of 61,678, the index has fallen nearly 13% in just 15 trading sessions, underscoring the sharp pace and magnitude of the decline. A fall of this nature within such a short period generally reflects aggressive position unwinding and rising risk aversion among market participants, particularly within the banking sector.

Technically, the overall structure continues to remain bearish. Going forward, the 53,400–53,200 zone is likely to serve as an important support region, as a horizontal trendline support is located around these levels. However, if the index breaks decisively below 53,200, it could intensify the downward pressure and potentially drag the index towards 52,500 and then 51,800 in the near term. On the upside, any short-term bounce or relief rally may encounter significant resistance in the 54,500–54,600 range, which could act as an immediate supply zone and trigger renewed selling.

Which two stocks would you pick for next week?

Aurobindo Pharma

Aurobindo Pharma has broken its horizontal trendline on the daily chart and shown strong follow-through, outperforming the Nifty as indicated by a sharply rising ratio line. RSI is above 60 and rising, signalling bullish momentum, while the stock has been riding the upper Bollinger Band, a characteristic of strong uptrends.

Price action and momentum indicators suggest the current uptrend is likely to continue, making the stock a key outperformer to watch in the near term. Hence, we recommend accumulating the stock in the zone of Rs 1,290-1,300 with a stop-loss of Rs 1,255. On the upside, it is likely to test the level of Rs 1,385 in the short term.

Coal India

Coal India has broken its horizontal trendline on the daily chart, overcoming the stiff Rs 455–460 resistance zone. Momentum indicators are supportive: RSI is trending higher, MACD is above zero, and its signal line, and ADX is rising, signalling a strengthening bullish trend.

Price action and technical signals suggest that the uptrend is likely to continue, positioning the stock as a near-term outperformer. Hence, we recommend accumulating the stock in the zone of Rs 465-470 with a stop-loss of Rs 453. On the upside, it is likely to test the level of Rs 500 in the short term.

Do you see confirmation of a bullish engulfing-type pattern in Syngene International next week?

Syngene International has posted a higher close after a minor pullback from Rs 400, but the stock remains well below key short- and long-term moving averages. Technical indicators suggest bearish pressure: RSI is just below 40, and DI- is above DI+ on the ADX, indicating bears are still in control. As long as it stays below the Rs 430-425 zone, the extension of a pullback is unlikely.

Do you see a pickup in buying interest in Muthoot Finance next week?

Muthoot Finance has successfully held above its 200-day EMA zone of Rs 3,200–3,250. Historically, the stock has seen strong buying from this zone, such as in May 2025, when it rallied nearly 100% over the next eight months.

RSI has reclaimed 40, signaling early bullish momentum, though MACD remains below zero and DI- is above DI+ on ADX. If the stock continues to hold above the 200-day EMA and momentum indicators improve, there is a high likelihood of pullback extension on the upside next week.

Do you expect further downside in the Nifty Auto index, or will Friday’s low act as support next week?

The Nifty Auto index has declined nearly 10% over the past three sessions, with major constituents such as TVS Motor, Bajaj Auto, Maruti Suzuki, M&M, Eicher Motors, and Hero MotoCorp slipping below their 200-day EMA, an important indicator of long-term support. From a technical perspective, momentum appears weak as the RSI has dropped below the 40 mark and continues to trend lower, while the ADX is rising, signalling strengthening downside momentum.

In addition, the Relative Rotation Graph (RRG) indicates that the sector is gradually losing relative strength against the broader market. Given these signals, investors should refrain from attempting to catch the bottom and instead wait for signs of stability — such as the RSI moving back above 40 or prices sustaining near key support levels. The next crucial support zone for the index lies around 23,400–23,300, which had acted as a floor in August 2025; a breakdown below this range could lead to additional selling pressure in the sector.