While the inability to add on to early February’s large upside move was seen as disappointing, filling the upside breakout gap with the return to 25,450 region last Friday, has made it safe to conclude that the upmove that got initiated at the start of the month has been completely invalidated.
Whether this marks the start of a new downtrend, needs more investigation.
IT in deep red; others not so
IT stocks clearly led from the front in dragging the broader market down.
With a few IT stocks also dominating key benchmark indices, the fate of those indices were also not very different.
But while the Nifty IT Index dropped sharply, sinking about 12% below the 20 day SMA, not all sectors performed similarly.
Infact, only Nifty FMCG, was the only one among the key benchmark indices to have slipped below this key benchmark average besides IT, with just 0.92% cut at Friday’s close.
Meanwhile, on the other end of the spectrum, Nifty consumer durables remained 5.4% above the 20 day SMA. Also, important to note that 66.7% of Nifty auto and metal indices’ constituents remained above their respective 50 day SMA, suggesting that broader market has not collapsed as would the benchmark indices suggest.
Signal from FIIs
On the face of it, FIIs too appear to have returned to the bearish mode having boosted their shorts by 4% and cut their longs by 10.9%, both in the index future segment, on Friday.
While this has dragged the FIIs long short ratio of the index future segment to 19.4, it is still better than the 18.3 levels of the previous Friday.
This is because, through last week, until Friday, FIIs have been steadily boosting their index future longs, while simultaneously cutting their index future short positions.
Consequently, their index future long position which is now at 46,668 contracts is 7.3% higher than the previous Friday, while the short positions, at 1,94,241 is just 2.7% higher than that of previous Friday, which closed at 1,93,712 contracts.
Thus, it may be surmised that both the broader market signals, as well as that of FII positioning do unilaterally suggest an extended break down next week.
Healthcare Index: Strengthening reversal signals
Nifty Healthcare is showing early signs of an upward reversal after holding firm near the 14,000 support zone.
A higher-low formation on the weekly chart, coupled with RSI stabilizing above 50, reflects underlying strength.
Meanwhile, MACD is flattening and appears poised for a bullish crossover, improving the probability of a sustained move higher. As long as the index remains above 14,000, the broader bias stays constructive.
On the stock front, heavyweights such as Sun Pharma, Divi’s Lab, Torrent Pharma, Apollo Hospitals, and Cipla have formed weekly reversal patterns, suggesting the pullback could extend toward 14,600 and potentially 15,200–15,500.
PSU Banks: Profit taking underway
The Nifty PSU Bank Index is hovering close to recent highs, but weekly candle structures indicate hesitation, pointing to instances of term profit booking.
RSI remains elevated around 70, signaling stretched momentum. Within constituents, SBI, which carries 40% weight, has an RSI above 75, making it vulnerable to short-term exhaustion.
In contrast, PNB, Canara Bank, and Bank of Baroda posted negative weekly returns, with RSIs in the 41–46 range, highlighting fading momentum and raising consolidation risks.
Derivatives positioning adds caution, with 40–50% long additions in near OTM puts and short build-up in calls. While the broader trend remains constructive, uneven internal strength and divergence in weekly performances suggest scope for rotational profit booking.
Any corrective move toward the 8,900 support zone may provide better entry setups, provided the index continues to hold above its rising trendline.
First published in Financial Express