F&O Talk: Budget, Earnings Will Drive Nifty’s Next Big Move, Nifty Bankruptcy Potential, Says Rahul Ghosh of Hedged.in

Indian benchmark indices showed a mixed performance on Friday, with the Nifty closing lower despite relative strength in the broader market. The Nifty faced selling pressure throughout the session, ending the day at 23,203, while the volatility index (India VIX) rose 1.82%, indicating increased market uncertainty.

Technically, the Nifty formed a hammer candle on the daily chart, suggesting buying interest at lower levels but remains below its 250-day simple moving average (SMA) of 23,560. This, along with the doji formation on the weekly chart, points to uncertainty. While the Nifty Midcap and Smallcap indices closed with modest gains, the overall market sentiment remained cautious.

Given the current market conditions, Hedged.in founder analyst Rahul Ghose spoke to ET Markets about the outlook on the Nifty and Bank Nifty along with the index strategy for the coming week. Following is an edited excerpt from their chat:

Amid sharp declines, indices seem to have taken a rest this week. However, the long-term downtrend seems intact. What would you comment on this?

The recent break in the market decline can be attributed to oversold conditions and short-term technical support. Levels of 23,000 and 22,300-22,500 are strong supports for the market, while on the upside, 24,000 is likely to act as a barrier.

The broader trend remains bearish to the downside, driven primarily by global macroeconomic uncertainties, rising interest rates and concerns over domestic demand. Investors should approach the market with some caution in 2025, focusing on quality stocks with strong fundamentals and a defensive tilt or flat-out momentum. We are making lower tops and lower bottoms on daily and weekly charts. A sustained uptrend can be expected only when this pattern breaks.

Nifty’s November 21 low of 23,263 appears to be a hurdle for now. On the downside, the 23,047 level looks like support. Do you see a consolidation somewhere in the index until it gets a trigger for some momentum on either side?

Yes, Nifty seems to be in consolidation phase as it oscillates between the mentioned levels. This range-bound movement reflects the market’s search for direction amid mixed signals. As mentioned earlier, a sustained upmove can be expected only when we break the pattern of lower highs and lower lows on the daily chart. The previous peak is currently at 24,200-24,250. Selling rallies are likely until the index breaks this point with two bullish candles. As per the chart, chances are high that Nifty may test pro-election gap around 22,130-21,300 level in 2025.

Corporate earnings or budget announcements can determine the next big move.

Meanwhile, the Bank Nifty is facing resistance from its 10-day EMA on the daily chart. On the monthly chart, it has supported the 20-month EMA. Does this indicate indecision among market participants?

Indeed, this reflects greater uncertainty, as participants weigh conflicting factors. While 20-month EMA support highlights buying interest at low levels, 10-day EMA resistance suggests caution amid lack of confidence. However, considering the lower top and lower bottom pattern in the Bank Nifty index as well, it seems that this inconclusive result will lead to a breakdown rather than a breakout. On spot, Bank Nifty’s 50,000-50,400 range is a strong barrier.

Do you suggest any key levels to watch out for in Nifty and Bank Nifty? Or do you suggest deploying some hedging strategies?

In both Nifty and Bank Nifty, the pro-election gap is likely to act as support in 2025. In the case of Bank Nifty, levels of 47,486-46,100 can be watched for potential buying opportunities, while 50,000-50,400 is. strong resistance. In case of Nifty, 24,200 is strong resistance, and 22,130-21,300 is strong support.

How do you read current FII-DII activity?

Foreign institutional investors (FIIs) continued to be net sellers due to global risk-off sentiment and a strong dollar. On the other hand, domestic institutional investors (DIIs) have been selectively buying, pushing the market past the deep correction. In the domestic market, FIIs remained net sellers, with the cash segment at Rs. 16,854 crores sold. However, DII provided strong support, with Rs. 21,682 crore was a net inflow, partially cushioning the market decline. This tug-of-war underscores the importance of being selective in stock picking.

After all months of our markets making new all-time highs, this has been a drawn-out period of correction. What advice do you have for traders and investors at a time like this?

For traders, the focus should be on disciplined risk management and short-term adaptation. Avoid bare futures positions as markets are prone to wide gaps on either side. If you want leverage, do it through the options route by taking a debit or credit spread.

Investors, meanwhile, can use this correction to pick up fundamentally strong stocks at attractive valuations, especially in defensive sectors like FMCG and healthcare. Apart from this, there are some stocks which are fundamentally sound and are now available at good prices from a technical point of view. However, as an investor, be prepared to be patient for at least 1-2 years. It is impossible to time the bottom. As long as you buy good stocks at reasonably good levels in the tranches you should be fine.

Let’s talk about some stocks instead of indices. What do you think happened to Kalyan Jewellers’ stock? As of Thursday, the stock had fallen 31% in just 2 weeks. Meanwhile, another retail favourite, Paytm, bounced back from its decline in the last 2 days. What is your point of view here?

Surprisingly, the stock has been on a downward spiral despite a strong business update in the December quarter.

The sharp drop in Kalyan Jewelers came despite rumors about corporate governance by promoters, share pledges, concerns about auditors and allegations of collusion with fund managers to manipulate market prices.

Technically, the shares are in a strong downtrend in all time frames and any recovery is likely to be met with more selling pressure. The counter can be avoided for now until further clarification.

On the other hand, Paytm’s recovery reflects an improvement in sentiment around fintech after a period of underperformance. In both cases, long-term investors should assess the business’s fundamentals and future growth prospects before making a decision. Technically, Paytm is forming a cup and handle pattern on the monthly chart, indicating strong accumulation at lower levels, potentially leading to a breakout.

Brokerage firms are optimistic about the Q-commerce space in India. What are your thoughts on Swiggy and Zomato?

The fast-commerce sector holds immense potential given the increasing penetration of online delivery and changing consumer preferences. However, these businesses must balance growth with profitability. Zomato’s recent restructuring efforts and Swiggy’s focus on hyperlocal expansion are positive signs, but continued cash flow generation is critical for long-term success. Zomato has performed well recently but shows strong profit booking opportunities in the short to medium term. The stock is likely to touch the 220 level in the short term, which could be a good entry point. Overall, in 2025, I am bullish on Zomato and expect it to perform well as a stock.

Let’s talk about the upcoming annual budget, which is about 2 weeks away. What are your expectations from the budget in terms of the market?

Markets expect measures to boost manufacturing, infrastructure and rural spending. Incentives for renewable energy, tax relief for middle-income groups and policies encouraging private investment will be major positives. Clarity on fiscal deficit targets will also be closely watched. Reforms in the insurance sector will be closely watched as governments aim for the ambitious target of insurance for all.

Do you have a key theme that investors and traders should pay attention to?

Themes like renewable energy, generation under PLI scheme, financial inclusion and affordable housing are different. Additionally, sectors such as FMCG, healthcare and IT remain attractive for their defensive characteristics amid volatility. FMCG stocks have come down significantly from their highs, discounting most of the negatives and available at good levels. Biocon, Lupine and Dr. Many pharma stocks like Reddy are in a strong uptrend and any dip could potentially be a buying opportunity.

Any stocks that look fundamentally strong in the themes you just mentioned?

Within these themes, stocks such as NTPC and Tata Power in renewables, HDFC Bank in financials and Biocon in healthcare stand out, along with Zomato as mentioned earlier. Most of these companies have strong balance sheets or momentum to them. They are well positioned to benefit from long-term sectoral tailwinds. In IT, apart from large-caps, some mid-cap IT stocks like Bsoft are available at good prices both technically and fundamentally.

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