F&O Talk | Nifty trades in tightest weekly range since Nov 2023, ends flat in holiday week. Sudeep Shah explains what’s ahead

Market sentiment was influenced by a mix of domestic macro cues and global developments. India signed a comprehensive Free Trade Agreement (FTA) with New Zealand, reinforcing its Indo‐Pacific outreach and efforts to diversify exports. On the macroeconomic front, growth in the eight core infrastructure sectors slowed sharply to 1.8% in November, pointing to a near-term easing in industrial activity. Benchmark indices traded sideways amid thin volumes, while analysts see low volatility, strong supports and smallcap resilience setting the stage for a potential breakout driven by earnings, budget cues or global triggers. With this, analyst Sudeep Shah, Vice President and Head of Technical & Derivatives Research at SBI Securities, interacted with ET Markets 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 is ending the week with losses, and the weekly candle shows a classic Hammer formation. While the "Santa Rally" seems to have lost steam, the index is hovering near 26,050. Is this a sign of a "reversal" or just holiday-thinned consolidation before the January effect kicks in? During the past week, the holiday-induced slowdown was clearly visible on Dalal Street, as the benchmark index Nifty traded within a narrow range of just 227 points - the tightest weekly range recorded since November 2023. During the week, the index scaled a high of 26236 before witnessing a mild throwback. Despite this brief retracement, Nifty managed to close the week with a marginal gain of 0.29%. On the weekly chart, the index formed a Gravestone Doji candle, reflecting hesitation at higher levels amid subdued participation. A notable highlight of the week was India VIX slipping to its lowest-ever weekly close, indicating an extreme compression in volatility and a growing sense of calm among market participants. Historically, such extended low-volatility phases often precede a sharp directional expansion, making the current quietness in the market far more meaningful than it appears at first glance. While the frontline indices remained largely range-bound over the past few sessions, the broader market continued to outperform. The Nifty Smallcap 100 index witnessed a strong pullback rally, driven by sharp recoveries in several previously beaten-down small-cap stocks. Additionally, selective pockets such as Railways, CPSE, and PSE stocks staged a notable rebound, suggesting that buying interest is gradually shifting beyond the headline indices. Going ahead, the 26,200-26,250 zone is expected to act as a crucial resistance band for Nifty. A sustained move above 26250 could pave the way for a sharp upside rally towards 26,500, followed by 26,650 in the short term. On the downside, the zone of 25,900-25,850 will act as important support for the index. Nifty is currently oscillating around its 10 and 20 DEMA (Daily Exponential Moving Average). Does this technical resilience suggest that the "buy-on-dips" strategy is still valid despite the lack of momentum? Nifty’s current behaviour-oscillating around its 10 DEMA and 20 DEMA-reflects underlying resilience despite the absence of strong momentum. This kind of...

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