Caution ahead of earnings ensured that the weak bias seen at the start of the week persisted in the subsequent days as well. A slew of IPOs also added to the distraction. Consequently, it took the Nifty to slip as far as the 10-day Simple Moving Average (SMA) to draw out the reluctant buyers. This helped Nifty to bounce back in the closing hour of Friday, but let us see if the broader market also responded in similar fashion.
Broader market recovers, but strength yet to emerge
Even though 52% of the stocks on the Nifty 500 fell below their Thursday’s low, nearly 80% of them managed to recover and close above those lows on Friday, pointing to a regrouping of bulls. This has ensured that 63% of them are still trading above their respective 10-day SMAs, despite a week-long slippage.
However, only 48% of them closed above their respective daily VWAP, when compared to 62% on the Nifty. Nearly 22% of the Nifty 500 stocks bounced back at least 1.5% from the intra-day’s lows on Friday, suggesting that the pullback was not forceful enough to suggest a full recovery from the week’s bearish bias.
The contraction in premia along with the rise in Open Interest (OI) of both puts and calls on the Nifty suggests an expectation of a lower trading range. This is perhaps suggestive of a shrinking range expectation on the benchmark indices as we head to the earning season. Stocks have also seen a rise in implied volatility, pointing to positioning ahead of Q1 numbers, anticipating big moves. Thus, it appears that a stock-specific approach would be preferred over index plays in the coming week.
Meanwhile, the index future long ratio for FIIs, which had briefly gone up to 40 in the previous week, has slipped below 30. This is not surprising, as the recent rise in the ratio was largely aided by the covering of shorts rather than the addition of longs, which we had noted last week. Incidentally, in the first week of July, not only did FIIs reverse positioning by adding more shorts, but they also cut back on their index future longs, resigning the index future long ratio to the lowest level of the week by Friday.
Nifty Pharma Index signals brewing bullish momentum
The Nifty Pharma Index has been consolidating in a narrow range since March 2025, consistently testing the weekly Supertrend support near 22,600 – a pattern that points to accumulation.
Technical indicators are now converging, hinting at an imminent breakout. The monthly MACD histogram exhibits signs of exhaustion, a typical lead-in to upward movement. RSI levels averaging around 55 across major stocks imply ample room for upside before overbought conditions set in. Sectoral studies suggest strength when compared to other sectors.
Leading constituents, including Sun Pharma, Cipla, Zydus Life, Divi’s Lab, Torrent Pharma, Mankind Pharma, Lupin, and Aurobindo Pharma, are expected to steer the index toward the 23,150 mark. Collectively, the technical setup and strength indicators reflect a positive near-term outlook.
Nifty Metal Index Breaks Out, presenting Tactical Entry
The Nifty Metal Index has surged past the weekly Supertrend threshold of 9,550, triggering a bullish breakout. A retracement toward this breakout level – which now serves as support – may provide a strategic entry point.
With an average RSI of 53 among index constituents, the trend shows strong momentum while steering clear of overbought territory. Sectoral rotation studies point to outperformance relative to the broader market.
Index heavyweights such as JSW Steel, Tata Steel, Hindalco, Jindal Steel, and SAIL are expected to lead further gains, reinforcing the bullish technical structure and supporting a continued uptrend.
