Indian benchmark indices experienced a choppy session on Friday, giving up most of their intraday gains but still ending slightly higher, signaling a cautious start to the January series.

The S&P BSE Sensex settled at 78,699, up by 226.6 points or 0.29%, while the broader Nifty 50 index closed at 23,813.40, higher by 63.20 points or 0.27%.

Analyst Rahul Ghose, Founder of Hedged.in, interacted with ET Markets regarding the outlook on Nifty and Bank Nifty along with the key levels on the index. Following are the edited excerpts from his chat:

With the Nifty ending the week near the 23,800 level, what are the immediate support and resistance zones for the coming week?

The weekly December closing formed a neutral candle, signaling indecisiveness between buyers and sellers. This is typical for the end of December, as market activity tends to slow down due to the holiday season. For the short term, the market’s support is seen around the 23,200–23,300 range. There is a small pro-gap in this area, where a decent bounce was seen in November 2024. However, given that prices did not make a significant upward move from this support level, the bounce is expected to be short-lived, with a high likelihood of further declines towards the next support levels of 22,900–22,600.On the upside, the 24,500–25,000 range is identified as a strong resistance zone. The 25,000 level is particularly important due to the large open interest (OI) built up in call options, suggesting that the index is unlikely to breach this level in the near term.

What is your view on the index’s struggle with the 200-day moving average in determining its near-term trend?

It’s clearly a negative sign. In recent instances, whenever the indices have approached the 200 DMA, they have staged a strong bounce back. This is what is expected from a healthy market. However, the price action surrounding the 200 DMA recently has been characterized by neutral to indecisive candles.

This, coupled with the fact that RSI levels are hovering around 34–35, further suggests that a decisive break below the 200-day moving average is likely.Note that Reliance Industries (RIL), which has the highest weightage in the Nifty index, is well below the 200 DMA. The majority of Nifty 50 constituents are also trading below the 200 DMA. HDFC Bank and select IT stocks have helped keep the index afloat in the last few trading sessions.The index cannot sustain a rally based on just a few names. Broad participation is essential.

Is Bank Nifty a better bet, being placed above the 200 DEMA? What trend do you foresee?

Bank Nifty is afloat primarily due to the outperformance of HDFC Bank. The rest of the banks, such as SBI, Axis Bank, IndusInd Bank, and many others, are in a strong downtrend and are also trading well below the 200 DMA. Sooner or later, even Bank Nifty might give way. Technically, a break below the 49,600 level is likely to trigger a sharp downfall for Bank Nifty.

FIIs have shown consistent selling pressure recently, even amidst thin volumes. How might this trend influence market sentiment, and which sectors are likely to bear the brunt of this selling?

FIIs have heavily sold in three major sectors: Oil & Gas (close to Rs 5,300 crore), Auto (close to Rs 1,800 crore), and FMCG (around Rs 1,600 crore).

These three sectors are likely to remain under pressure. FMCG may see some support at lower levels, given the quality of companies in this sector and the fact that many stocks are already down 30–40% from their highs. This sector is also likely to be the fastest to recover when conditions improve.

However, Auto and Oil & Gas sectors might experience further selling before things return to normalcy. For example, in the Oil & Gas sector, ONGC and Oil are forming strong bearish patterns on both monthly and quarterly charts.

What does the December-to-January series rollover data suggest about traders’ expectations? Are higher short positions being carried forward?

Rollover data from December to January indicates cautious optimism, with marginally higher short positions being carried forward. This suggests that traders are hedging their positions against potential downside risks, reflecting uncertainty in the near-term outlook. A pickup in rollovers at higher open interest levels would signal renewed confidence, but that has yet to be observed.

Are there any sectors or stocks that are well-suited for taking positions based on the rollover data?

The rollover data suggests strength in sectors like pharmaceuticals, where positions are being carried forward with a positive bias. Stocks such as Sun Pharma and Lupin appear well-placed technically, offering opportunities for traders and investors alike. Some banking stocks, particularly private banks, are also seeing healthy rollovers, indicating potential for further upside. In the banking sector, HDFC Bank and ICICI Bank look strong.

What is the sentiment for the January series, considering the technical and derivative indicators?

The sentiment for the January series appears cautiously optimistic. Key derivative indicators like the put-call ratio (PCR) and the volatility index (VIX) suggest that the markets are unlikely to experience extreme volatility. However, the upside is likely to be capped unless there is a meaningful recovery in FII inflows and global cues turn favorable. The January series might lean towards a consolidation phase, with stock-specific action dominating. Additionally, traders and investors will be watching for Trump’s immediate actions when he takes charge on January 20th.

Are we likely to see a recovery or further consolidation in the early weeks of 2025?

The early weeks of 2025 may witness further consolidation as markets digest global macroeconomic developments and Q3 earnings. A recovery is likely if there is clarity on global uncertainties, such as U.S. Fed policy or China’s growth trajectory. Domestic factors, such as budget expectations and consistent DII inflows, could provide additional support. If we look at history, it becomes clear that markets tend to move in cycles. We saw a strong rally in Nifty from 2012-2016, followed by consolidation for one year (2016-2020) before COVID struck.

From 2020-2021, Nifty moved from 7,500 to 18,000, followed by another year of consolidation. In a similar pattern, a move from 15,500 in September 2022 to 26,000 in September 2024 is likely to be followed by a year of consolidation. After all, if one has to go far, they need to catch their breath to travel the distance. 2025 might very well be that year of catching the breath.

Do you see any global uncertainties still weighing heavily on the Indian markets? What are your expectations from the Q3 earnings?

Global uncertainties, such as the U.S. Federal Reserve’s interest rate trajectory, geopolitical tensions, and China’s economic recovery, Trump policies continue to weigh on Indian markets. As far as Q3 earnings are concerned analysts expect sequential revenue growth for India Inc in the December quarter, led by improved rural demand and an uptick in government spending, additionally supported by the festival season.

However, headwinds such as uneven urban demand and evolving global uncertainties could weigh on growth in the second half of the fiscal year. On balance, it is expected that the operating profit margin (OPM) for India Inc will improve in the coming quarters.

Do you recommend any stocks and sectors that are well poised for the upcoming year?

2025 will be a year of selective stock picking, unlike previous years where almost everything rallied. Specifically in 2025, we expect the pharma as a sector to do well & one can keep a close watch on Lupin, Cipla, Dr. Reddy and IT stocks like major IT bellwether companies ( TCS, Wipro, HCL Tech, Infy) & select midcap IT stocks. The entire IT pack is likely to benefit positively from the AI boom which will only get stronger with the new leadership in the US.

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