Nifty's 25K breakout has more legs, smallcaps signal risk-on mood: Geojit's Anand James
Synopsis Nifty's breakout above 25,000 signals strong momentum, though many stocks remain below past peaks. Smallcaps show broad strength, defence stocks may see short-term fatigue, and banking looks bullish on strong cues. Stock-specific moves in Adani Green and Jindal Steel are favored, while IT may undergo consolidation before the next rally. Nifty's breakout above 25,000 reflects strong momentum, with 42% of its constituents being at least 10% below their respective September peaks, says Anand James, Chief Market Strategist, Geojit Investments Limited. In an interview with ETMarkets, he breaks down the signals in smallcaps, defence, and banking stocks, while flagging key breakout trades like Adani Green and Jindal Steel to ride the bull wave.
ADVERTISEMENT The quick ascent is characteristic to trending markets. But Nifty is still 4.6% below the record peak hit in September 2024, while 42% of its constituents are at least 10% below their respective September peaks. Also, only 14% of the constituents are above the upper Bollinger band, suggesting that we could have more leaders stepping in and helping Nifty continue the ascent. Also, Nifty is only 2.5% away from the 20-day SMA, pointing to more room for upsides.
Yes, we see that markets are in a risk-on mode, and hesitation for the small cap index previously visible is not present anymore. That said, there is no froth either yet, with only 14% of the Smallcap 250 index constituents having an RSI of 70 or above, suggesting overbought conditions and 40% of small cap stocks having an RSI below 60 pointing at more leg room higher. Also, only 22% of the small caps have risen above their September peaks, echoing the same sentiments. Further only under 30% stocks are above 2 standard deviations from 20 day SMA, suggesting that we are not yet extreme situations yet, which augurs well for a more broad based strength in the small cap space.
The bullish momentum in defence stocks continued, with most stocks successfully breaking above their weekly supertrend levels. However, the average daily RSI has now surged past 70, entering the overbought zone. This suggests that the sector may be approaching a near-term exhaustion phase.
Stocks such as GRSE, Mazagon Dock, Data Patterns, and BDL, which have seen significant gains, could be vulnerable to profit booking. While a final leg of upside may still be in play early in the week, caution is advised as overbought conditions could trigger short-term corrections. Investors should watch for signs of reversal or consolidation in high-flying names. On the other hand, Cochin Shipyard and BEL appear poised to emerge as potential outperformers in the coming sessions, possibly benefiting from rotational buying within the sector.The outperformance in Nifty IT index over this week rode on Monday's steep rise. The IT index showed signs of exhaustion as the week progressed, unable to surpass Monday's high. This inability to break resistance, coupled with a 60% short buildup across IT stocks, suggests a cautious stance in the near term.
ADVERTISEMENT Despite this, the weekly charts for heavyweight IT stocks remain structurally positive, indicating that the current phase may be a healthy consolidation before the next leg of the uptrend. In contrast, the Bank Nifty appears poised for gains, supported by strong technical and derivative cues.A significant 75% of banking stocks have seen short covering on a weekly basis, and 58% witnessed fresh long positions today, reflecting growing bullish sentiment. Major players like HDFC Bank, ICICI Bank, Axis Bank, and Kotak Bank are showing average RSI values around 57, suggesting ample room for further upside.
ADVERTISEMENT The only notable laggard is SBI. With rate sensitives in focus amidst expectation of policy easing by RBI as inflation has come down, the banking sector could remain positive. That said, some of the IT index constituents are yet to see the breakout move that has begun to become visible across sectors. Towards this end, we do not recommend a complete sectoral rotation, but a stock wise shuffling may be advised to make the most of this phase.Approach of 62% fibo of the Jan-April move as well as the vicinity of the November 2024 trough (8574) makes a case for limited upside this week. But this period may not mark an end to the uptrend, despite the steep run higher since 7th of April. Dips may be bought, with downside markers placed below 7,400.
ADVERTISEMENT ADANI GREEN (CMP: 1,020)View - BuyTarget - 1,075Stoploss - 943
ADVERTISEMENT The stock has broken above the horizontal channel resistance and ended both the day and the week with a bullish Marubozu candle, indicating strong positive momentum. The monthly SMIO is also on the verge of crossing above the zero line, and the stock has closed above the 20-week moving average for the first time since September 2024—further confirming the potential for an upside move. We anticipate the stock to advance towards 1,075 in the coming weeks. All long positions should be protected with a stop-loss placed below 943.JINDAL STEEL (CMP: 981)View - BuyTarget - 1,060Stoploss - 914The stock has broken above the declining weekly trendline resistance this week and concluded the week with a strong Bullish Marubozu candle, signaling renewed positive sentiment. It has also closed above the 50-week moving average for the first time since December 2024. Additionally, the monthly SMIO is nearing a crossover above the zero line, suggesting the potential for a sustained upward move. We anticipate the stock to head towards the 1,060 level in the coming weeks. Long positions should be safeguarded with a stop-loss set below 914.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
(You can now subscribe to our ETMarkets WhatsApp channel)
niftysmallcapsdefencebankingadani greenjindal steel Why gold prices could surpass $4,000: JP Morgan's bullish outlook explained
Why gold prices could surpass $4,000: JP Morgan's bullish outlook explained Cyient shares fall over 9% after Q4 profit declines, core business underperforms
Cyient shares fall over 9% after Q4 profit declines, core business underperforms L&T Technology Services shares slide 7% after Q4 profit dips
L&T Technology Services shares slide 7% after Q4 profit dips Trump-Powell standoff puts U.S. Rate policy in crosshairs: Who will blink first?
Trump-Powell standoff puts U.S. Rate policy in crosshairs: Who will blink first? SEBI warns of securities market frauds via YouTube, Facebook, X and more
SEBI warns of securities market frauds via YouTube, Facebook, X and more API Trading for All: Pi42 CTO Satish Mishra on How Pi42 is Empowering Retail Traders
API Trading for All: Pi42 CTO Satish Mishra on How Pi42 is Empowering Retail Traders Security, transparency, and innovation: What sets Pi42 apart in crypto trading
Security, transparency, and innovation: What sets Pi42 apart in crypto trading Bitcoin, Ethereum, or Altcoins? How investors are structuring their crypto portfolios, Avinash Shekhar explains
Bitcoin, Ethereum, or Altcoins? How investors are structuring their crypto portfolios, Avinash Shekhar explains The rise of Crypto Futures in India: Leverage, tax efficiency, and market maturity, Avinash Shekhar of Pi42 explains
The rise of Crypto Futures in India: Leverage, tax efficiency, and market maturity, Avinash Shekhar of Pi42 explains How Pi42 is simplifying crypto trading: CTO Satish Mishra on integrating technical & fundamental insights
NEXT STORY
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
&w=3840&q=100)
Business Standard
34 minutes ago
- Business Standard
India holds the top spot in our EM playbook: Bernstein's Venugopal Garre
Garre tells that improving macro conditions and lower earnings risk make this a good time to start evaluating bottom-up opportunities in quality midcaps Listen to This Article Mid and smallcap stocks took a beating during the market correction earlier this year. Venugopal Garre, managing director and India head of research at Bernstein, tells Puneet Wadhwa in an email interview that improving macro conditions and lower earnings risk make this a good time to start evaluating bottom-up opportunities in quality midcaps. His December 2025 Nifty target is 26,500. Edited excerpts: It has been a choppy year for equities globally. Which camp are you in — the bulls or the bears? Globally, we expect continued volatility as policy uncertainty remains high, particularly with ongoing US-China trade negotiations and shifting
&w=3840&q=100)
Business Standard
34 minutes ago
- Business Standard
Demat accounts grow by 2.2 million in May, total hits 196.6 million
May snaps a four-month slide with 2.2 million new accounts, pushing the total towards 200 million Listen to This Article About 2.2 million new dematerialised (demat) accounts were opened in May, raising the total to 196.6 million as stock prices continued their upward trend. This marks the first monthly increase in new account openings since December 2024, following a steady decline from January through April. Industry experts project the total to surpass the 200-million milestone by mid-July. The stock market ecosystem attracted fresh investors amid a share price rally. In May, Indian equities extended their gains, with the benchmark Nifty and Sensex each rising nearly 2 per cent. Broader markets outperformed — the Nifty Midcap 100 climbed 6.1 per cent,
Mint
3 hours ago
- Mint
Market geared for fresh upmove post RBI action
The surprise monetary easing on Friday ignited an aggressive selling of Nifty put options, indicating that India's benchmark stock index is poised for a surge when the market opens on Monday. On Friday, the Reserve Bank of India's monetary policy committee (MPC) transmitted a clear signal for growth, slashing the benchmark repo rate by 50 basis points (bps) and the cash reserve ratio requirement (CRR) by 100 bps. Traders responded by selling a huge quantum of put options at Nifty's 25,000 level, reflecting the belief that the index would clock smart gains on Monday. Open interest (OI) in Nifty's weekly 25000 strike put expiring on Thursday rose a whopping 470% to 83,472 contracts on Friday after the policy announcement. Open interest is the total number of outstanding derivative contracts. Sriram Velayudhan, senior vice-president, IIFL Capital Services, said this reflects the fresh trigger for markets from the RBI's unexpected action. "The outsized cuts in the repo rate and the unexpected significant easing of the CRR have given a bullish texture to the market," said Velayudhan. "Most mutual funds are underweight financials and IT, and with this cut, we expect fresh buying in rate-sensitives, which will prop up the market. One of the signals of bullishness is reflected in the sale of the ATM (at-the-money) put, which shows the high confidence of the traders." At-the-money refers to options which trade at or close to the current market price of an underlying index or stock. 'Bullish sign' Rajesh Palviya, SVP (head of derivatives & technical research), Axis Securities agreed with Velayudhan's take on the index. "Writing puts at the same level as the Nifty is a very bullish sign," said Palviya, who raised the range for the Nifty to 24900-25500 from 24500-25100 after the RBI action. Traders have baked in a range of 24670-25330 for the Nifty this week with an immediate bias to the upper end of the range, Palviya added. Also read | Has RBI unleashed its arsenal too soon for the economy? Traders sell more put options relative to call options when they believe markets will rise, enabling them to pocket the premiums paid by the put buyers—investors who buy put options either to punt or to hedge their portfolios against anticipated volatility. Conversely, traders sell more calls than puts when they expect markets to fall. The Nifty closed 1% higher at 25003.05 on Friday after RBI cut the rate at which it lends to banks (repo) by a greater-than expected 50 bps to 5.5% against the market estimate of 25 bps. It also reduced the share of total deposits banks must park with it (CRR) by 100 bps in tranches to 3%. The policy panel also shifted monetary policy stance to neutral from accommodative. FPIs trim positions Meanwhile, foreign portfolio investors (FPIs) trimmed their short index futures positions to 92730 contracts on Friday from 106,988 contracts a day earlier. Retail and high net worth investors (HNIs) booked some profits on their bullish index futures positions by reducing these to a net long 61524 contracts on Friday from 68669 net long contracts on Thursday. FPIs have turned net buyers of Indian shares since mid-April as the dollar weakened and the US bond yields fell. After selling ₹2.85 trillion worth of shares in the secondary market between October and March, fuelling a 9% fall in the Nifty to 23519, they net purchased shares worth ₹21,327 crore in April and May, aiding the Nifty's recovery by 5.2% to 24751 by the end of last month. Also read | RBI to soon issue easier gold loan rules for small-ticket borrowers Since then, FPIs turned net sellers worth ₹12,077 crore in the month through 5 June, as per NSDL, which hadn't released the figure for Friday. However, BSE data shows that FPIs net purchased shares worth a provisional ₹1009.71 crore on Friday, while domestic institutional investors purchased a net ₹9,342.48 crore. BSE data shows that DIIs absorbed the FPI selling at lower levels, net buying ₹3.75 trillion worth of stocks between October last year and March this year. Their buying of ₹1.2 trillion since March end to 6 June drove the recovery from a multi-month low to 21743.65 on 7 April to 25003.05. From March end to 6 June, FPIs net invested ₹10,260 crore in the cash market, NSDL data showed. Jyoti Jaipuria, founder of PMS firm Valentis Advisors, is bullish on markets after the RBI policy, as he believes the rate cut and CRR reduction, could spur consumption demand, leading to better earnings growth. He is bullish on small cap companies in the financial, chemicals, pharma and engineering segments. Also read | RBI aims to boost economic growth, liquidity with jumbo rate and CRR cuts
