The Indian stock market rallied sharply on Friday, with the Sensex and Nifty gaining 2% each, as hopes of a US-Iran peace deal, easing crude oil prices, and improving global sentiment lifted investor confidence.
Sensex surged over 1,695 points to close at 75,527.95, while Nifty50 jumped over 461 points to end the session at 23,622.90. The rally added around Rs 10 lakh crore to the combined market capitalisation of BSE-listed companies, taking the total market value to around Rs 462 lakh crore.
Analyst Sudeep Shah, Vice President and Head of Technical & Derivatives Research at SBI Securities , interacted with ETMarkets regarding the outlook for the Nifty and Bank Nifty, as well as an index strategy for the upcoming week. The following are the edited excerpts from his chat:
Nifty staged a strong rally on Friday. How is the setup looking for next week?
Last week, the benchmark index Nifty witnessed heightened volatility during the first four trading sessions, oscillating within a range of 355 points. Despite the choppy price action, a key positive development was the index repeatedly taking support near the 61.8% Fibonacci retracement level of its previous upmove (22,182–24,602). Notably, Nifty tested this crucial support zone three times during the week, indicating strong buying interest and the formation of a solid base. This laid the foundation for a sharp rebound, which materialized in Friday's trading session. But what triggered such a dramatic shift in sentiment after four days of indecision?
Market sentiment improved significantly on Friday following positive developments in West Asia. Adding to the optimism, Brent crude oil prices witnessed a sharp correction and slipped below the $90 mark. As a result, the index ended the week with a gain of 1.10%, forming a sizeable bullish candle on the weekly chart. The price action was encouraging, but the technical setup that emerged was even more noteworthy.
From a technical perspective, Friday's rally holds added significance as Nifty closed above its 20-day EMA for the first time since May 2026, signaling an improvement in short-term momentum. The daily RSI has rebounded sharply from lower levels and is now trading above the 50 mark while also moving above its 9-day average. Meanwhile, the Daily Stochastic has generated a bullish crossover, further strengthening the positive undertone. With multiple indicators turning favorable simultaneously, the obvious question is—how much room does the rally still have?
Going forward, the recent breakout above key short-term resistance levels, coupled with improving momentum indicators, suggests that the index may extend its upward move towards 23,800, followed by the psychological 24000 mark. On the downside, the zone of 23,350–23,300 is likely to act as a crucial support area. As long as this support remains intact, the bulls appear to have regained control—but the next few sessions will reveal whether this is merely a rebound or the beginning of a stronger uptrend.
Bank Nifty was up nearly 5%. What's been the trigger, and how are charts looking?
The banking benchmark index, Bank Nifty, has emerged as a key outperformer over the past few trading sessions. Last week, the index confirmed a breakout from a Symmetrical Triangle pattern on the daily chart, triggering a strong upward move. More importantly, this strength in banking stocks has played a crucial role in helping the frontline indices defend lower levels and stage a meaningful recovery.
From a technical standpoint, Bank Nifty is comfortably trading above all its key moving averages. The 20-day and 50-day EMAs have started turning higher, reflecting an improvement in the underlying trend. Momentum indicators also remain supportive of the ongoing upmove. Notably, the daily RSI has surged above the 60-mark for the first time since February 2026, highlighting a significant pickup in bullish momentum.
Given the favorable price structure and strengthening momentum, we expect Bank Nifty to extend its upward trajectory and test the 57,500 level, followed by 58,300 in the near term. On the downside, the zone of 56,200–56,000 is likely to provide strong support and act as a cushion against any short-term corrective moves.
Nifty IT, on the flipside, has been on the receiving end. Is it in oversold territory, and what are some levels to watch out for?
Nifty IT index currently trades below its key short-term and long-term moving averages, reflecting a weak technical structure. While there was a recent attempt to move above the 50-day EMA, the rally failed to sustain, resulting in renewed selling pressure. Notably, the 50-day EMA had also acted as a strong resistance zone in April, reinforcing its significance.
Momentum indicators continue to favor the bears. The RSI has slipped below the 40 mark and remains in a declining trajectory, indicating weakening momentum. Furthermore, the MACD line is trading below both the signal line and the zero line, accompanied by rising red histogram bars, which further strengthens the bearish outlook.
From a relative strength perspective, Nifty IT is currently positioned in the Weakening quadrant of the Relative Rotation Graph (RRG), suggesting deteriorating relative momentum versus the broader market.
On the downside, the previous swing low zone of 27,050–27,000 is likely to act as a crucial support area. A decisive and sustained break below this zone could trigger further weakness in the index. On the upside, the 28,250–28,300 zone is expected to act as an immediate resistance, and only a move above this hurdle could provide some relief to the prevailing bearish sentiment.
Have you seen any meaningful change in the Put-Call Ratio (PCR) this week, and what does it signal about market sentiment?
The PCR had dropped to a low of 0.78 on June 1, when Nifty closed at 23,383. Since then, the ratio has steadily recovered and has not revisited those depressed levels. More importantly, on June 8, Nifty slipped further to an intraday low of 23,070, yet the PCR stood higher at 0.84. This created a notable bullish divergence between price and PCR, where the index made a lower low while the PCR formed a higher low. Such divergences often indicate that bearish momentum is losing strength and that the possibility of a reversal or pullback is increasing.
The significance of this divergence becomes even more compelling when viewed alongside the technical structure of the index. Nifty repeatedly found support in the 23,120–23,100 zone, which coincides with the 61.8% Fibonacci retracement of the previous upmove. The market's ability to defend this key support area despite persistent selling pressure highlighted the presence of buyers at lower levels.
Derivatives data also pointed towards an improving backdrop. Over the last three sessions, the FII long-short ratio in index futures improved from 7.5% to 10%, reflecting meaningful short covering. This improvement came despite Nifty trading in a choppy range and struggling to sustain higher levels, suggesting that bearish conviction was gradually waning.
Adding to this, crude oil prices witnessed a breakdown and largely remained range-bound despite geopolitical tensions and attacks over the past couple of days. The market's resilience to negative news flow, coupled with improving derivatives positioning and the bullish PCR divergence, collectively hinted at the possibility of a pullback rally, even before renewed discussions surrounding a potential U.S.-Iran deal emerged.
What's your strategy for HDFC Bank, given a good recovery on Friday? Also, HFCL, Sterlite, showed sharp volatility, what should investors do?
HDFC Bank: Despite Friday's strong recovery and HDFC Bank reclaiming its 20-day EMA, it may be premature to conclude that a decisive trend reversal is underway. There are encouraging signs, with the RSI trending higher and the DI+ crossing above the DI- on the ADX indicator, suggesting improving momentum. However, confirmation in the form of sustained higher closes over the coming sessions will be crucial.
The broader setup remains constructive, particularly as private banks continue to outperform the benchmark index, as reflected by the rising ratio line on the Nifty Private Bank/Nifty ratio chart. That said, on the weekly timeframe, HDFC Bank is still trading below its key short- and long-term moving averages. For now, the Rs 730–725 zone is expected to act as a strong support area, and the stock can witness a pullback as long as it remains above this level.
HFCL: The stock has witnessed profit booking of nearly 18% from its high of Rs 209 recorded on June 4. Despite the correction, the stock has managed to hold above its 20-day EMA, indicating that the broader uptrend remains intact. Given the sharp rally witnessed in recent weeks, further profit booking cannot be ruled out, especially with both RSI and ADX hovering near peak levels on the weekly timeframe.
The Rs 160–155 zone is likely to act as a strong support area. The overall trend is expected to remain bullish as long as the stock sustains above this zone.
Sterlite Technologies: The share has also undergone a healthy correction of around 14% after hitting a high of Rs 680 on June 5. Similar to HFCL, both RSI and ADX are near elevated levels on the weekly chart, indicating that some additional consolidation or profit booking may still occur.
The Rs 530–525 zone is a key support area to watch. As long as the stock holds above this range, the broader bullish structure remains intact and the stock is likely to resume its upward journey over the medium term.
What are some stocks that you are keeping an eye on in the coming week?
Technically, Avalon Tech, KEI Industries, Titagarh Rail Systems, Data Patterns, AU Small Finance Bank, Kotak Mahindra Bank and Power Mech look good for the short term.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
