Chartist Talk: Sudeep Shah sees this sectoral index extending gains; shares 2 stock picks for next week

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

• Widening MACD histogram indicates strengthening downside momentum in Nifty 50
• Decisive and sustained breach below 24,300 could accelerate downside move in Nifty
• Considering current chart structure and overall market setup, Sudeep recommends a sell on rally approach

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Given the strong technical and momentum setup, the Nifty India Defence index is well positioned to continue its northward journey in the short term, with dips likely to attract buying interest, said Sudeep Shah, the Head of Technical and Derivatives Research at SBI Securities in an interview to Moneycontrol.

Adding to this strength, according to him, the ratio chart of Nifty India Defence versus Nifty has broken above a downward sloping trendline on the daily timeframe—an indication that the defence sector is entering a fresh phase of relative outperformance.

He bets on ABB India, and National Aluminium Company (NALCO) for next week. "With Friday’s close, ABB has also moved above the midline of the Bollinger Bands, which suggests strengthening price momentum and a higher likelihood of further upside in the near term, while NALCO has closed above the upper Bollinger Band for two consecutive sessions, suggesting strong buying pressure and the possibility of continued upward momentum in the near term," he reasoned

Do you think the situation is so severe that the Nifty 50 could easily break the crucial 24,000 support next week, or is 24,300 a strong support level?

The domestic equity markets experienced a volatile week, primarily influenced by rising geopolitical tensions between the United States and Iran. The growing uncertainty in West Asia kept investors on edge, exerting pressure on the frontline indices. Consequently, the benchmark index Nifty witnessed sharp fluctuations throughout the week, with each trading session opening either with a gap-up or gap-down, reflecting the nervousness prevailing across global markets. The impact of these tensions was not confined to equities alone, as several key global macro indicators also began signalling heightened risk.

Brent crude oil prices climbed to their highest level in 85 weeks amid concerns over potential supply disruptions from West Asia. Simultaneously, the Indian rupee weakened significantly, with the USD/INR pair touching a record low of 92.30 before seeing a modest recovery. Adding to the risk-averse environment, India VIX — the market’s volatility index — surged nearly 45% during the week to reach a nine-month high, underscoring the sharp rise in market uncertainty. Against this backdrop of global turbulence, the benchmark index has begun displaying clear signs of technical fragility.

From a price action standpoint, the benchmark index has declined by more than 7% from its recent record highs, indicating a phase of profit booking triggered by global uncertainties. This decline has also pushed the index below several important short-term and medium-term moving averages. In particular, the 20-day, 50-day, and 100-day exponential moving averages (EMAs) have started turning downward, which technically points to weakening near-term momentum. However, a closer examination of momentum indicators suggests that the downward pressure may still persist.

Momentum indicators continue to paint a cautious picture. The daily RSI has slipped below the 40 level and remains in a declining trajectory. At the same time, the daily MACD is positioned in bearish territory, trading below both the zero line and its signal line. The widening MACD histogram further indicates strengthening downside momentum. This naturally raises the key question for traders and investors — which levels should be closely monitored in the coming sessions?

Looking ahead, market movements are likely to remain highly sensitive to geopolitical developments and shifts in global risk sentiment. Given the prevailing uncertainty, the index may continue to witness sharp price swings in the near term. Technically, the 24,350–24,300 zone is expected to act as a crucial support area, as it aligns with a previous swing low. A decisive and sustained breach below 24,300 could accelerate the downside move, potentially pushing the index towards 24,000 and subsequently 23,800 in the short term. On the upside, the 24,800–24,850 range is likely to serve as an immediate resistance zone.

Do you expect the sell-on-rally strategy to continue until the Nifty 50 moves back above 25,500?

Considering the current chart structure and overall market setup, we continue to recommend a sell on rally approach.

Do you see the Bank Nifty easily breaking its long-term moving average, the 200-day EMA, next week?

The Bank Nifty, which had been outperforming the frontline indices until just a few sessions ago, faced a sharp reversal last week. The index tumbled 4.54 percent, marking a significant underperformance compared to the broader market. This decline resulted in the formation of a large bearish candle on the weekly chart, indicating strong selling pressure and a clear shift in sentiment within the banking space.

With this correction, the Bank Nifty has slipped decisively below its 20-50-100-day EMA levels, reinforcing the weakening trend. It is now inching closer to its crucial 200-day EMA, a zone widely tracked by institutional participants for long term trend confirmation.

Momentum indicators also echo this bearish tone. The daily RSI has fallen below the 40 mark for the first time since September 2025, signalling growing downside momentum. Meanwhile, the MACD histogram shows an expansion on the negative side, suggesting an acceleration in bearish pressure.

Given this setup, the banking index is likely to extend its downward trajectory over the next few trading sessions unless strong buying emerges at lower levels. In terms of key levels, the 200-day EMA zone of 57,500–57,400 will act as a vital support area. A sustained move below 57,400 could trigger further decline toward 56,800, and subsequently 56,000, in the short term. On the upside, any recovery attempt is expected to face resistance near the 58,700–58,800 zone, which will act as an important hurdle for the index.

Do you think defence stocks such as Mazagon Dock Shipbuilders and Bharat Dynamics will continue their uptrend next week as well, especially after their healthy run during the week?

The Nifty India Defence index has delivered a strong technical breakout, ending a prolonged 22-week consolidation phase and forming a sizeable bullish candle on the weekly chart. This breakout signals renewed strength and confirms the continuation of its primary uptrend. In the previous week, the index significantly outperformed the frontline indices, reflecting robust sectoral momentum and sustained buying interest.

Adding to this strength, the ratio chart of Nifty India Defence versus Nifty has broken above a downward sloping trendline on the daily timeframe—an indication that the defence sector is entering a fresh phase of relative outperformance. All key moving averages are aligned in favour of the bulls, and momentum indicators—both price and oscillator based—are pointing towards strong upside traction. Given this setup, the index is well positioned to continue its northward journey in the short term, with dips likely to attract buying interest.

Stocks such as Mazagon Dock Shipbuilders Ltd and Bharat Dynamics Ltd have rebounded strongly from their recent lows, supported by a healthy pickup in volumes. Momentum indicators also signal improvement, with the RSI recovering sharply from sub-40 levels, indicating renewed bullish momentum. Additionally, DI+ trading above DI– in the ADX indicator highlights a stronger presence of buyers over sellers.

Both stocks have also reclaimed their key short-term moving average of the 20-day EMA on the daily chart. As long as they hold above their recent swing lows, the upmove could extend further.

Which two stocks are currently on your buying radar for next week?

ABB

ABB Ltd has given a Rs 6,073–5,794 consolidation breakout on the daily chart. Despite sideways movement over the last three sessions, the stock managed to hold above its 20-day EMA, indicating strong short-term support. The RSI has rebounded from 53 and settled marginally above 60, signalling a pickup in bullish momentum.

With Friday’s close, the stock has also moved above the midline of the Bollinger Bands, which suggests strengthening price momentum and a higher likelihood of further upside in the near term. Hence, we recommend accumulating the stock in the zone of Rs 6,070-6,010 with a stop-loss of Rs 5,850. On the upside, it is likely to test the level of Rs 6,500 in the short term.

National Aluminium Company

National Aluminium Company has given a Rs 392–329 February consolidation breakout on the daily chart. The breakout was accompanied by a healthy rise in volumes, indicating strong participation from buyers. The RSI is trending higher and has moved above 60, signalling strengthening bullish momentum.

Additionally, the DI+ has crossed above DI– on the ADX indicator, highlighting the growing dominance of buyers over sellers. The stock has also closed above the upper Bollinger Band for two consecutive sessions, suggesting strong buying pressure and the possibility of continued upward momentum in the near term. Hence, we recommend accumulating the stock in the zone of Rs 398-394 with a stop-loss of Rs 382. On the upside, it is likely to test the level of Rs 430 in the short term.

Are Mangalore Refinery and Petrochemicals Limited and Data Patterns (India) Limited inching closer to overbought zones?

Data Patterns has recently given a horizontal trendline breakout on the daily chart, which is supported by a healthy rise in volumes. The RSI is currently around 75, indicating strong momentum. While this places the stock near the overbought zone, it still leaves some room for further upside, especially considering the improving relative strength in the defence space against the Nifty 50. Additionally, the rising ADX suggests strengthening bullish trend strength.

On the other hand, MRPL staged a sharp rebound from its 20-day EMA about three sessions ago, again backed by strong volumes. Its RSI is hovering near 67, which remains below the overbought zone and indicates potential for further upside. As long as key support levels hold, both stocks could continue their upward trajectory.