The Indian stock market has a strange way of testing how emotionally strong traders and investors are. Volatility comes in with a bang just when confidence is at its highest. Last week was a great example.
The Nifty 50 fell from its recent high of 26,373 to 25,623, a drop of -2.45% over the course of the week. This was the biggest weekly drop since April 2025. This sudden drop caused many short-term traders to panic, who were used to the one-way rally.
But the markets do not often head north in straight lines. Corrections, especially after a big uptrend, are often a sign that traders are taking profits, not that the trend is over.
Is this the start of a bearish phase that will follow, or is it just a break in a bigger bull market?
Leaders leading the fall: Should we be worried?
Reliance Industries and HDFC Bank, two stocks that make up almost 20% of the Nifty 50, fell sharply. Reliance lost 7.35% and HDFC Bank lost 6.25% last week. When leaders start to correct, the traders are in a dilemma about how long the rally will last.
According to conventional market wisdom, if heavyweight stocks lose momentum, it becomes harder for indices to go up. This is when fear starts to creep in with the question – are the leaders hinting at a bigger correction coming?
It is important to look at more than just two stocks before making any decisions.
The other side of the story: Strength underneath
Not all heavyweights, though, took part in the sell-off. Last week, ICICI Bank, which makes up almost 8% of the Nifty 50, went up by 3.61%. This difference in prices is a sign from the market that selling pressure is not widespread but rather selective.
The IT sector, which makes up about 10% of the index, adds another layer to this analysis. The Nifty IT index constituents in the Nifty were down about 1.50% on average, but the price action suggests that something much bigger is going on underneath. This mixed behaviour across sectors shows that the market is turning, not falling apart.
Before we head to the Nifty IT analysis, let us see the charts of Reliance Industries and HDFC Bank.
Reliance Industries: At the long term average
Reliance Industries is currently above the 200-day Exponential Moving Average (200 DEMA) channel on the daily chart. This channel has been a support in the past. This average has protected against drops and helped new rallies get started time and time again.
The recent drop, while sharp, looks more like a pullback in a main uptrend than a breakdown. As long as the stock stays within this moving average zone, the bigger bullish structure will stay in place. This is a pause, not a reversal, when you look at it from a trend-following point of view.
HDFC Bank: Not giving up, but consolidating
HDFC Bank tells a story that is a little different but just as important. The stock has been trading in a wide range for the last three quarters.
Prices are now closer to the lower end of this range, which is around Rs. 900–930. This also happens to be a well-known demand zone.
Traders who are bullish and bearish both get angry when the market stays in a range. But when the price gets close to the bottom of a long consolidation range, it usually gets institutional interest instead of panic selling. This behaviour supports the idea that the recent drop is part of a structural consolidation, not a breakdown of the bull trend.
The most important thing to learn from heavyweights
If we take a step back and look at Reliance and HDFC Bank objectively, we can see that last week’s drop does not mean that the trend has changed. Retracements, consolidations, and volatility are all normal parts of a healthy bull market.
Now that we have that clear, let us turn our attention to the field that could quietly change the story – Information Technology.
Nifty IT Index: A quiet way to set up leadership
The Nifty IT index has shown clear signs of bullish momentum building on the weekly chart.
The index is now above its 62-week Exponential Moving Average (62 WEMA) Channel, which is an important medium-term trend indicator.
The higher low formation near the 200 WEMA Channel makes this setup even more interesting because it shows that there is long-term support.
When a shorter-term moving average channel, like the 62 WEMA above the 200 WEMA, starts to trend above a longer-term moving average, it usually means that a medium-term bullish phase is about to start.
The RSI has moved into a bullish range, making higher lows and finding support near long-term averages. This mix of price structure and momentum often comes before long-term rallies.
The index looks like it is forming a probable ascending triangle, with a horizontal resistance level near 39,600. If this level is broken decisively, the momentum may accelerate and put IT stocks back in charge.
“But IT Weighs Only 10%, does It Really Matter?”
This is a good question. Can a sector that only makes up 10% of the Nifty 50 really have an effect on it?
Yes, history shows this to be true, especially during times of sectoral rotation. When traditional leaders take a break, markets often find new ones. IT could be that cushion, keeping follow-through selling from happening in the broader index, because its technical structure is getting better and it is relatively strong.
The Ratio Speaks: Nifty IT vs. Nifty 50
Another key piece of information comes from the Nifty IT/Nifty 50 ratio chart. The ratio has sloped north on the daily timeframe after finding support at the 50DEMA. More importantly, the base that formed in 2025 probably may head north.
Charts that show ratios are very useful. They show how much better one thing is doing than another. The way things are set up right now makes it look like IT stocks may do well in the next few quarters.
The two IT stocks that have turned probably bullish and offering an opportunity to traders and investors are HCL Technologies Ltd and Wipro Ltd.
1 HCLTECH
On the daily chart, the stock price of HCL Tech is outperforming the Nifty IT index and Nifty50. The reversal from the 200DEMA band of High, Low and Close signifies the strength in the trend.
Bulls also see the retracement as accumulation, which may probably take the index higher. The breakout from the falling trendline at Rs. 1,700 may accelerate the bullish momentum on the stock.
2. WIPRO
On the daily chart of Wipro, the market retested the breakout from the three months consolidation zone.
The sustainable move above the 200DEMA Channel is a sign of bullish strength, and the reversal from the breakout retest indicates an opportunity.
Should you panic or get ready?
Market corrections can be uncomfortable, but they often have hidden meanings. The drop last week in Nifty50 does not look like the start of a bear phase; it looks more like a consolidation driven by rotation.
Heavyweights are not breaking down; they are correcting into supports. At the same time, IT is quietly laying the groundwork for possible leadership.
Traders should not make decisions based on fear right now. Now is the time to watch, wait, and get ready. Corrections test discipline, and they also set the stage for the next chance.
As always, the markets reward traders who can tell the difference between noise and structure. The structure still favours the bulls at this time.
Note: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Brijesh Bhatia is an Independent Research Analyst and is engaged in offering research and recommendation services with SEBI RA Number – INH000022075. He has two decades of experience in India’s financial markets as a trader and technical analyst.
Disclosure: The writer and his dependents do not hold the stocks discussed here. The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives and resources, and only after consulting such independent advisors if necessary.