F&O Talk: Nifty charts suggest further consolidation; Sudeep Shah's strategy on Cohance, HEG and 4 more stocks

Indian equities witnessed a broad-based sell-off on Thursday amid a spike in volatility. Banks, auto and consumer stocks turned out to be major drags. While the 50-stock Nifty declined 180.10 points or 0.74% to finish at 23,997.55, the Sensex plunged 582.86 points or 0.75% to settle at 76,913.50.

Meanwhile, the volatility gauge India VIX ended at 18.46, up 5.86% from the last close.

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:

Q: Nifty ended with weekly declines of 0.7% as rupee weakness and crude oil prices around $115 a barrel have once again brought back concerns of inflation. What pattern do you see on charts and what levels will hold key this week?

The benchmark index Nifty closed April on a strong note, gaining over 7% and snapping its four-month losing streak. After marking a low of 22,182 on April 2, the index staged a sharp rebound of more than 2,400 points within just 11 trading sessions. This rally was primarily driven by improved global risk sentiment following the US-Iran ceasefire, which eased geopolitical concerns and triggered broad-based short covering. But the real question is: has this rally built a strong base, or is it just a sharp bounce waiting to fade?

The index touched a high of 24,601 on April 21, after which profit booking set in. Over the last six trading sessions, Nifty has been consolidating within a narrow range of 24,335 to 23,798, reflecting market indecisiveness. This hesitation is largely due to multiple factors, including rising Brent crude prices, uncertainty around the sustainability of the US-Iran ceasefire, upcoming state election outcomes, and the USD/INR hitting a fresh record low. With so many moving pieces, is the market quietly preparing for a decisive breakout or breakdown?

Going ahead, we expect heightened volatility in the near term. On the upside, the 24,300 to 24,350 zone will act as a key resistance. A sustained move above 24,350 could trigger a sharp rally towards 24,500, followed by 24,700. On the downside, the 23,800 to 23,750 zone remains crucial support. A breakdown below 23,750 may lead to further correction towards 23,600 and then 23,400. The next move from these levels could define the trend for the coming weeks.

Q: Do you expect the April momentum to continue given May is historically a seasonally positive month for the bulls?

After delivering nearly 7% returns in April, the Nifty followed its historical seasonality well. However, May has typically been more mixed and relatively weaker compared to April. Over the past 20 years, the index has closed negative nine times, with an average decline of 4.3%, while it ended positive 11 times, posting an average gain of 5.89%. Since 2020, the trend has remained inconsistent, with even years tending to be negative and odd years positive. Currently, Nifty is consolidating within a 538-point range between 24,350 and 23,750. A decisive breakout on either side is likely to determine the next directional move.

Q: What is the derivatives data suggesting about Nifty and Bank Nifty?

The derivatives data for both Nifty and Bank Nifty indicate a phase of consolidation with a cautious undertone. Over the last six sessions, Nifty futures have seen a build-up in open interest alongside sideways price action, indicating a mix of long and short positions rather than a clear directional trend. The options data highlights strong resistance around 24,300 to 24,500 and support near 23,750, suggesting a well-defined trading range. The PCR for the current expiry is at 0.87, reflecting a mild bearish bias, but not strong conviction.

In contrast, Bank Nifty appears relatively weaker. Its futures positioning remains choppy, while the options chain shows slightly heavier call writing and a comparatively lower PCR, indicating a cautious to slightly bearish stance. Overall, the setup suggests a range-bound market, with a decisive breakout likely to dictate the next directional move.

Q: Banking & financials have been top underperformers this week and more so the public sector banks. What is your view on it and are there any recommendations?

The banking and financial services space has been underperforming over the last couple of trading sessions. Considering the current chart structure, we believe they are likely to continue their underperformance in the short term. The momentum indicators and oscillators are also portraying a similar picture.

Q: Smallcap stocks have continued to show their dominance over large and midcaps so far in 2026. Do you expect higher traction in this segment going ahead and where can one look for opportunities?

The smallcap segment has continued to outperform the broader market during the recent pullback rally, showcasing strong relative strength. Notably, the Nifty Smallcap 100 index surged by 18.44% in April, significantly outperforming both large and mid-cap indices. In addition, the ratio chart of the Smallcap index versus the Nifty is exhibiting a clear pattern of higher highs and higher lows, indicating sustained relative outperformance.

From a technical perspective, the overall structure remains robust. The index is trading above key moving averages, while momentum indicators continue to signal strong bullish traction. This alignment of trend and momentum suggests that the smallcap segment is likely to maintain its leadership in the near term.

Given this backdrop, investors can continue to focus on fundamentally strong stocks within sectors that are already showing relative strength, as these are likely to offer better risk-reward opportunities during the ongoing uptrend.

Q: Cohance, Sapphire Foods and HFCL were among top gainers this week, while HEG, MRPL and Zensar have been big losers. What should investors do with them?

Cohance: The stock has witnessed a strong pullback of nearly 59% from its April 6 low of 293. A rising ADX highlights strengthening trend momentum, while an upward-sloping MACD reinforces the bullish bias. However, it remains a low-volume counter. Immediate support is placed at 430 to 425, and the uptrend is likely to continue as long as the stock holds above this zone.

Sapphire Foods: After consolidating in the 184 to 160 range since April 9, the stock has broken out, backed by a sharp surge in volumes. While it is still early to confirm a full-fledged reversal, sustaining above 185 to 183 could open the door for further upside.

HFCL: The stock has been on a stellar run, rallying 76% from its March 23 low of 66. However, with RSI at 84 and ADX near 65, it is in a highly overbought zone. This raises the likelihood of near-term profit booking. Key support is seen in the 100 to 95 zone.

HEG: The stock has broken down from its consolidation range of 619 to 690 and slipped below its 20-day EMA. RSI has dipped below 60, indicating fading bullish momentum, while DI- is on the verge of crossing above DI+, signalling increasing seller dominance. Resistance is placed at 623 to 625, and the outlook remains sideways to bearish till the stock trades below this level.

MRPL: The stock has breached its prior swing low of 168 and is now trading below its 100-day EMA. RSI remains weak below 40, indicating sustained bearish momentum. As long as it stays below 179 to 180, the trend is likely to remain negative.

Zensar Technologies: The stock failed to hold above its 50-day EMA and has declined from its recent high of 611 (April 21). It is now hovering near its previous swing low of 511. RSI below 40 reflects bearish momentum. The trend is likely to stay weak as long as the stock trades below 545 to 550.

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