F&O Talk: Nifty plunged 2% this week. Do charts indicate a bearish picture for coming week?

SBI Securities' Sudeep Shah expects continued weakness in Indian equities as FII positioning, rising volatility and technical indicators point to further pressure. He identifies key Nifty support and resistance levels and flags IT as a relatively stronger sector.

The Indian stock market came under renewed selling pressure during the holiday-shortened last week as rising oil prices, persistent FII selloff and other headwinds spooked investors on Dalal Street, pushing Nifty and Sensex down more than 2% to snap a two-week gaining streak.

Sudeep Shah, Vice President and Head of Technical & Derivatives Research at SBI Securities, interacted with ETMarkets regarding the outlook for the coming week. The following are the edited excerpts from his chat:

Nifty's recovery attempt hit a wall at the 38.2% Fibonacci retracement level of its previous decline, closer to 23,200, triggering another wave of selling that pushed the benchmark index back into negative territory. The index eventually ended the week with a loss of over 2%, forming a bearish candle on the weekly chart. However, the real shock came from the broader market, where the sell-off was far more brutal, raising concerns about whether the worst is yet to come.

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Nifty Midcap 100 plunged nearly 6%, while the Nifty Smallcap 100 tumbled over 7%, recording its steepest weekly decline since February 2025. Both indices significantly underperformed their frontline counterparts and slipped below their crucial daily moving averages, highlighting the intensity of selling pressure beyond the benchmark space. With the broader market suffering disproportionately, the critical question now is whether frontline indices can withstand the growing bearish pressure.

Turning to Nifty, the index continues to trade comfortably below its crucial moving averages. The daily RSI is also declining and approaching the key 40 mark, which could further weaken the momentum if breached. With the benchmark index showing signs of renewed weakness, all eyes are now on the crucial support levels that could determine the extent of the next move.

What are key levels investors need to watch out for?

For Nifty, the 22,350-22,300 zone is expected to provide crucial support. However, a sustained break below 22,300 could intensify selling pressure and drag the index towards the 22000 mark. On the upside, the 22,800-22,850 zone, coinciding with the 20-day EMA, is likely to act as an immediate hurdle.

What do FII positions indicate currently?

FIIs were net buyers in the cash market on October 23, purchasing equities worth Rs 888 crore. However, FII flows have remained mixed over the last five trading sessions, with net cumulative outflows standing at Rs 1,531 crore. Despite recent bouts of buying, the overall sentiment has not witnessed any significant improvement.

Meanwhile, the FII long-short ratio in index futures has largely remained within the 8-11% range since the beginning of October. There are still no strong signs of short covering in index futures, indicating that FIIs continue to maintain a bearish stance.

What's your view on India VIX?

India VIX witnessed a downward-sloping trendline breakout on 9th September and moved higher before retesting its earlier resistance zone. Following the retest, the index witnessed a sharp rise in volatility. India VIX has now broken out of its 16.17-11.96 consolidation range and closed higher. The index also trades above its key moving averages, while RSI has started moving higher, indicating the possibility of a further rise in volatility in the near term.

Since 9th September, India VIX has risen nearly 41%, while Nifty has declined nearly 3.5%, reflecting heightened volatility and continued pressure on market sentiment. The 15.5-15 zone is likely to act as a crucial support. As long as India VIX sustains above this zone, volatility is likely to remain elevated, keeping the markets under pressure.

What is your view on the midcap and smallcap indices, which have witnessed a major underperformance in the week gone by?

The broader indices, Nifty Midcap 100 and Nifty Smallcap 100, witnessed intense selling pressure during the week, declining by nearly 6% and over 7%, respectively. Both indices formed sizeable bearish candles on the weekly chart, reflecting strong risk-off sentiment and broad-based weakness across the broader market segment.

Technically, both indices are trading below their key short-term and long-term moving averages, indicating a weak trend structure. The daily and weekly RSI for both indices remain in bearish territory, while other momentum indicators and oscillators continue to signal weakening price momentum. As a result, the near-term outlook remains negative, and both indices are likely to stay under pressure over the next few trading sessions.

For Nifty Midcap 100, the zone of 56,500-56,600 is expected to act as a crucial resistance area. As long as the index remains below 56,600, the prevailing corrective trend is likely to continue, with immediate downside targets placed at 55,000, followed by 54,000 in the short term.

Similarly, for Nifty Smallcap 100, the 18,050-18,100 zone is likely to act as a significant hurdle. As long as the index trades below 18,100, selling pressure may persist, increasing the probability of a decline towards 17500, followed by 17,200 in the short term.

What's your strategy for Eternal, Swiggy, eMudhra, and Ola Electric?

Eternal witnessed strong buying interest in the 305-300 zone, which had earlier acted as a resistance during January-February 2026. The zone also coincided with the stock's 100-day EMA, making it a crucial support area. The stock is currently undergoing a phase of consolidation, with directional momentum yet to emerge. As long as the stock sustains above the 305-300 zone, the bullish bias is likely to remain intact, with a strong possibility of an extension of the pullback in the near term.

Swiggy witnessed a sharp fall of over 14% and hit an all-time low following the declaration of its quarterly results. The stock continues to trade significantly below its key short- and long-term moving averages. Rising ADX indicates strengthening bearish trend momentum, while RSI slipping below the 40 mark reflects increasing bearish momentum. As long as the stock trades below the 205-210 zone, the bearish bias is likely to remain intact.

eMudhra has corrected nearly 48% from its high of 682, recorded on 22nd September 2026. The DI lines have widened, with DI- positioned significantly above DI+ on the ADX indicator, reflecting strong bearish dominance. The MACD line has slipped below the zero line, accompanied by rising red histogram bars, indicating sustained bearish momentum. As long as the stock trades below the 435-440 zone, the bearish bias is likely to remain intact.

Ola Electric was largely consolidating within the 44-35 range since late July before witnessing a breakdown on 8th October, followed by further downside. The stock now trades below its key short- and long-term moving averages. RSI continues to trend lower and has slipped below the 40 mark, reflecting weakening momentum. As long as the stock trades below the 34.5-35 zone, the bearish bias is likely to remain intact.

Which sectors look relatively stronger in the current scenario, and any stocks you feel can be focused upon?

Technically, Nifty CPSE, PSE, Defence, Consumer Durables, Oil & Gas, Energy, Financial Services, Capital Market, FMCG, Commodities, Metals, Realty and Chemicals are likely to remain under pressure and continue to underperform the broader market in the short term.

On the other hand, Nifty IT continues to display strong relative strength and is likely to sustain its outperformance in the near term.