We had begun last week riding on the confidence of having seen a close above the psychological level of 26,000 on the previous Friday. Momentum failed to persist, though, as Nifty continued to slide along a declining trendline that has held the upper band since December 1.
While we continue to be in the vicinity of 26,000, the momentum appears to be favouring an upside move. Let us see if the smaller caps, which have been lagging the large caps for quite some time now, have begun to bridge the gap.
Small caps gathering steam
We had pointed out the emergence of strength among small-cap stocks last week. This theme appears to be gaining traction, even as Nifty appears to slow down. While the Nifty 50 index is 0.56% above its 50-day SMA, the Nifty Smallcap 250 Index, having recently broken above the 5- and 10-day SMA, is still 2.6% below its 50-day SMA, pointing towards good room for upside.
Meanwhile, more than 54% of the Smallcap 250 Index is now above its respective 10-day SMA, the highest this month so far, further supporting the inference that strength in small-cap stocks is becoming more broad-based.
FIIs: Negative bias continues
While the broader market began to show signs of strength, FIIs’ reluctance has been a major worry, as they continued to stick to a negative view, as evident from their position in the index future segment. Their long-short ratio in this segment is now at 8.8, even lower than last week, suggesting that the recovery move in Nifty has failed to inspire FIIs into short covering.
The week ended with shorts being reduced 3.2% on Friday, but a 5% increase in index future longs on Friday has taken the number of long future contracts to just 17001, which is at the lower range of the long positions held this month so far.
Nifty Bank: Approaching wedge resistance, PSU banks offer support
The Nifty Bank index continues to trade within a falling wedge on the daily chart and is now nearing the resistance zone of the pattern. With the RSI holding above 50, a breakout attempt toward 59,400–59,700 remains possible, though the short-term structure still lacks strong conviction for an immediate rally.
From a derivatives standpoint, nearly 75% of stock futures saw long additions or short covering on Friday, while 50% recorded short unwinding on a weekly basis. Among the heavyweights, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, and Axis Bank remain vulnerable to further weakness. In contrast, PSU banks—particularly State Bank of India, Bank of Baroda, and Punjab National Bank—are cushioning declines, which could help limit deeper corrections. Such dips may present opportunities to accumulate longs in anticipation of a move toward 59,700.
Nifty Auto: Strong reversal, eyeing 27,830–28,000
After a week-long decline, the Nifty Auto index staged a sharp rebound on Friday, retracing nearly 50% from the week’s low and reaffirming support at the Supertrend level. A bullish Marubozu candle, backed by the highest monthly volumes, signals renewed strength. On the monthly chart, the index continues to hold above its Supertrend level, reinforcing a positive bias. The current pullback is expected to test 27,830 initially, with the potential to extend toward 28,000.
Derivative data adds weight to this view: nearly 75% of near-OTM put strikes saw short additions, while around 80% of stock futures recorded long build-up on Friday, suggesting traders are positioning for further upside.
On the stock front, leaders such as Mahindra & Mahindra, Maruti Suzuki India, Tata Motors (TMPV), Bajaj Auto, Eicher Motors, and Hero MotoCorp have formed strong reversal patterns on the daily charts, supporting expectations of the index moving toward 28,000.
About author
The author is Anand James, Chief Market Strategist at Geojit Investments.
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