In the previous week, all eyes were on Bank Nifty being at record peak, thus conveniently ignoring the lack of momentum in Nifty. The quick turn back below the previous breakout point, led to sharp withdrawal in buying interest, requiring Nifty to pull back as far as the mid 24,400.
While we saw a strong recovery on the previous Friday, we were not convinced that Nifty had successfully shrugged off bearish fears. But a few days of consolidation and dips finally gave Nifty the platform to swing sharply higher, reclaiming 25,000 on Friday. Let us see if broader markets are also excited about further prospects higher.
Broader market lagging Nifty
While just 8% of Nifty 50 stocks closed below the previous week’s lows, almost 50% of Nifty Smallcap 250 stocks closed below the previous week’s lows. Meanwhile, 22% of Nifty 50 stocks closed above the previous week’s highs, while only 3.2% of Nifty Smallcap 250 stocks succeeded in doing so.
Even when the Nifty 50 rose 1.29% on Friday, the fact that the Nifty Smallcap 250 Index managed to rise only by 0.6% points to a clear outperformance by Nifty. This also reflects that the small and midcaps have not been successful in shrugging off the bearishness seen earlier last week.
This has meant that despite the strong close on Friday,the Nifty Smallcap 250 Index is still 1.89% below the 20-day SMA. The Nifty is 0.66% above the same. Emphasising this theme, while 62% of the Nifty stocks have closed above their respective 10-day SMAs, only about 15% and 27% of stocks on the Small and Midcap indices managed to do so.
However, more than 66% of Smallcap Index stocks are trading above their 50-day SMA, while 70% of Nifty 50 stocks are above this benchmark pointing to the fact that while the rise that has persisted for over a month has taken a majority of stocks, irrespective of their size, well above the 50-day SMA, a divergence is playing out, as the SMIDs look exhausted.
Nifty IT Poised for Further Upside
The Nifty IT index has extended its upward trajectory from last week, decisively surpassing the weekly Supertrend resistance at 38,700. This breakout suggests a potential move toward the 61.8% Fibonacci retracement level near 40,300, calculated from the December 2024 high to the April 2025 low.
From a derivatives perspective, the sentiment remains optimistic. On Friday, 90% of IT stocks witnessed long positions being added, while 50% showed signs of short covering on a weekly basis—both indicators of strengthening bullish momentum.
Technically, the average RSI of key index components hovers around 60, indicating solid strength and further upside potential. Stocks such as Infosys, HCL Technologies, Wipro, Tech Mahindra, and Persistent Systems are expected to be the primary drivers of this rally in the coming week.
Nifty Auto Gears Up for a Fresh Rally
The Nifty Auto index has been in a steady uptrend since March, forming higher highs and signalling a reversal in momentum. The monthly SMIO histogram has been showing diminishing bearish pressure, with candles shrinking toward the zero line—now on the verge of crossing into positive territory. Meanwhile, the daily histogram has already moved above zero, reinforcing the bullish sentiment and hinting at stronger gains ahead.
On the derivatives front, nearly 60% of auto stocks witnessed either long additions or short covering on Friday, reflecting renewed buying interest across the sector.
Given this setup, the index appears well-positioned to test the 24,200 level in the near term, with a medium-term target of 25,000. Key contributors to this potential move include Tata Motors, M&M, Eicher Motors, TVS Motor, and Hero MotoCorp.
About author
The author is Anand James, Chief Market Strategist at Geojit Investments.
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