The equity benchmark experienced a remarkable surge, driven by a sharp decline in crude oil prices following the US midterm election results. The Nifty index soared by 8.5 per cent during the week, marking its strongest weekly gain since February 2021, and settled at 25030. While the broader market underperformed, the Nifty Midcap and Small Cap indices climbed by ~6 per cent and ~3 per cent, respectively. All major indices closed in the green, propelled by gains in the financial, auto, and real estate sectors.
Index started the eventful week with a positive gap and gradually marched upward. As a result, the index formed a sizable bull candle, indicating an acceleration of the upward momentum.
The index also logged a decisive breakout from an eight-month falling trend line, confirming the end of the corrective phase and suggesting the resumption of an uptrend. We expect Nifty to continue its upward journey and head towards 25,500 in the coming weeks.
However, this move will not be linear, as the past two weeks’ rally of approximately 2,500 points pushed short-term momentum oscillators into overbought territory, indicating the possibility of a temporary breather at higher levels cannot be ruled out. Such a breather would make the market healthy and pave the way for the next leg of the up move.
Our constructive bias is further supported by several key observations:
- The Nifty maintained its rhythm by arresting the corrective phase after limiting an eight-week losing streak and defending the long-term 200-week EMA, which coincided with the April 26 lows of 22,182. This bounce has confirmed the formation of a double-bottom pattern on the weekly chart.
- Over the past two weeks, the index has entirely recovered from its 12-week decline (24,774 to 22,180). This swift retracement signals a structural turnaround, opening the door for the next leg of the up move.
- The Indian market had lagged behind its global counterparts due to AI-driven momentum. However, the recent global sell-off in AI-driven stocks could provide a supportive tailwind for the growth-orientated Indian market. FII has seen the strongest inflow of ~32,000 crore in just the first week of November.
- Mirroring the benchmark move, Bank Nifty has also experienced a faster retracement, recouping its 17-week decline in just two weeks. The structural shift in the banking sector, which carries 37 per cent weightage in the Nifty, will likely drive the Nifty higher.
- There has been a significant improvement in the market breadth of the Nifty 50 universe. The percentage of stocks above the 200-day SMA has increased from 16 per cent ten days ago to 58 per cent. This substantial improvement bodes well for the continuation of the ongoing rally.
- A decline in crude oil prices and a cooling off in US 10-year bond yields will further support the rally. Any dips from hereon should be viewed as incremental opportunities to accumulate high-quality stocks backed by strong earnings.
- The US midterm election results represent a critical near-term trigger. Historical data from the past 11 occurrences since 1982 indicate that, on six occasions, the Sensex garnered an average positive return of 12 per cent.
The formation of higher highs and lows signifies a strong price structure that makes us revise the support base upward to 24300.
Larsen Tourbo: The stock has witnessed a falling trendline breakout joining highs of February and June 2026, indicating the conclusion of corrective bias.
Further, stock has entirely recovered from the nine-week decline in just two weeks, highlighting faster retracement that augurs well for the next leg of the up move. We recommend buying in the range of 4000-4112 for a target of 4520 with a stop loss of 3798.
SBI: Formation of a double bottom around the 100-week EMA, suggesting buying demand at a key support level.
Change of polarity coinciding with 50 per cent retracement of the entire Mar25-Oct26 rally (680-1234) suggests a favourable risk-reward proposition. We recommend buying in the range of 988-1018 for the target of 1129 and maintaining a stop loss of 929.