F&O Talk | Markets remain jittery but downside appears limited: Rahul Ghose

The markets continued to remain under pressure as the Nifty logged its fourth straight week of losses. Although the index attempted a recovery in the early part of the week, it failed to move past the previous week’s high of 25,250, leading to a broad-based sell-off in the final two sessions. The decline intensified on Friday, with the index breaching key support levels and ending the session with a 0.92% loss. Over the week, Nifty fell by 0.55%, closing at 24,830.

From a technical standpoint, the index’s structure has weakened significantly. On the daily chart, Nifty had been moving within a “Rising Channel” pattern since May. However, the breakdown below the lower trendline this week confirms a bearish reversal. Notably, this move was accompanied by a bearish gap, classified as a “Breakaway Gap,” which lends additional weight to the negative outlook. Furthermore, the index slipped below its 50-day EMA, a critical support level that had held firm until now.

With this, Rahul Ghose, Founder and CEO of Octanom Tech and Hedged.in, interacted with ET Markets regarding the outlook for the Nifty and Bank Nifty for the upcoming week. The following are the edited excerpts from his chat:

Lets start with your view on the market. How do you see the market these days?

The Indian stock market appears somewhat jittery at the moment. We’ve seen both the Nifty and Sensex drop pretty sharply, although the mood feels cautious now, the downside will be short-lived from here. Much of the action is specific to individual stocks and sectors, particularly when companies announce their quarterly earnings. But even though the Nifty has been making a series of lower highs and lows lately, all is not lost, the downside is very limited and the upside is more open.
Some might look at the fact that we are about to close the month of July with a dark cloud colour candlestick pattern just around the prior resistance. This is a warning sign for bulls of a potential further downside. However, our earlier view of Nifty possibly making an all-time high before Diwali is still intact, as we feel this pattern will get negated in August, September.

How has the earnings season been so far? Does it look like it will only push the market down?

Earnings for this quarter have been reasonably good on aggregate, with major companies managing solid profit growth. But the reaction on the street’s been mixed—some heavyweight disappointments have hurt overall sentiment, even as several companies posted strong numbers. So, while earnings aren’t dragging the market down single-handedly, lacklustre showings from big names are weighing things down.

Does there seem to be a head & shoulder-like pattern on the daily chart?

Many traders are talking about the possibility of a head & shoulders pattern emerging on the Nifty charts. We aren’t there yet—a clear breakdown below 24600 only would confirm it. For now, I’d call the setup ‘one to keep a very close eye on.’ The next few sessions could be key.

What’s the take on Nifty Bank now?

Bank Nifty has been relatively stronger but is still seeing some selling. If it manages to hold above the 56,000–57,000 zone, a rebound can be expected. I’m keeping a neutral stance for now, but a good upside potential will trigger if Nifty closes above 25,200, watching to see how earnings play out for the big lenders.

Overall, Bank Nifty charts are better than the Nifty index.

Any trading Strategies for the upcoming week?

This is a good market for being nimble and disciplined. I’d focus on predefined support and resistance levels, avoid chasing momentum, and look for trades around earnings events. Stock selection really matters right now, and strict stop-losses are vital given the spikes in volatility.

How does Bajaj Finance look after Q1 results?

Bajaj Finance’s first quarter was strong; profits and revenues were up sharply. That said, the stock reacted negatively, mostly because the bar was set so high and the broader market mood is nervous. I’d look for opportunities to add on further dips, especially if its asset quality remains robust.

Another interesting stock these days is IEX. What would be your take on IEX after the entire market coupling scenario?

Currently, IEX is the dominant platform for electricity spot price discovery in India. However, under the new framework, other exchanges, including Hindustan Power Exchange, will also participate in market coupling operations. This is expected to dilute IEX’s influence in the price discovery process and create more equitable market dynamics.

It is anticipated that the regulatory change may affect IEX’s long-held pricing advantage and trading volumes. This fundamentally alters market structure and puts pressure on IEX’s revenue model. Investors will rerate the stock with a structurally weaker outlook.

Technically, the stock is not looking very positive with a strong bearish close on weekly time frames. Such chart structures tend to signify a prolonged sideways movement with limited upside.

What do you think can support the market now? Any optimism in sight?

If we see some pleasant surprises on the earnings front, progress on economic reform, or global headwinds easing off, markets could stabilize or even bounce. Certain sectors and companies will likely keep powering ahead, even if the overall mood remains a bit downbeat. The trade deal with India could also be a major factor

Which sectors are you focused on now?

I’m fairly positive on power/renewables, select private banks and Pharma, capital goods, and to a degree. These areas are showing earnings resilience and have policy tailwinds supporting them.

Any stocks within those sectors?

• Financials: HDFC Bank, ICICI Bank, Bajaj Finance
• Industrials: L&T, Siemens
• Pharma – Torrent Pharma, Cipla, Dr Reddy’s

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times