F&O Talk: Mid, smallcaps to continue outperformance as Q1 begins, says Sudeep Shah; outlines Kalyan Jewellers, TCS strategy

The Indian stock market recorded strong gains on Friday, with the Sensex and Nifty rising more than 1% each as in-line earnings from IT heavyweight TCS, positive global cues and other factors boosted investor sentiment.The Sensex jumped 828 points to close at 77,569, while the Nifty 50 advanced over 244 points to end the session at 24,206, extending gains for the second consecutive session.

Meanwhile, India VIX, which measures market volatility, fell another 8% to 12.33.Analyst Sudeep Shah, Vice President and Head of Technical & Derivatives Research at SBI Securities, interacted with ETMarkets regarding the outlook for the Nifty and IT, as well as an index strategy for the upcoming week.

The following are the edited excerpts from his chat:Nifty started the week on a strong note, but the resumption of the conflict erased those gains.

How do the charts look now, and what are the key levels to watch?For the fourth consecutive trading session, the benchmark index Nifty continued to exhibit signs of uncertainty.

This indecisiveness is clearly reflected on the weekly chart, where the index has formed a small-bodied candle with shadows on both ends for the fourth straight week.

Such a candle formation highlights the ongoing tug-of-war between bulls and bears, making this one of the most prolonged phases of indecision witnessed in recent months.

But beneath this prolonged indecision, subtle shifts are beginning to emerge that could determine the market's next meaningful move.In sharp contrast to the benchmark index, the broader market continues to display remarkable resilience.

Both the Nifty Midcap 100 and Nifty Smallcap 100 are significantly outperforming the frontline indices.

The Nifty Midcap 100 scaled a fresh all-time high during the week, while the Nifty is still nearly 8% below its lifetime peak.

Meanwhile, the Nifty Smallcap 100 is just a stone's throw away from registering a new all-time high.

We continue to believe that the broader market is well positioned to sustain its relative outperformance in the near term.

Coming back to the benchmark index, the Nifty continues to oscillate around its key moving averages, which have flattened due to the prolonged sideways movement.

Momentum indicators and oscillators are also echoing the same view.

Both the daily and weekly RSI remain range-bound, while the daily ADX has slipped to 12.05 and continues to trend lower, indicating the absence of meaningful strength in either direction.

Going ahead, the 24,500–24,550 zone is likely to act as an important hurdle for the index, while the 23,950–23,900 zone remains a crucial support area.

A decisive breakout or breakdown beyond these levels could mark the beginning of the next directional move.The Nifty IT index rallied sharply after TCS' earnings.

What do the technicals suggest for the sector going forward?Despite the pullback from the 25,699 low recorded on July 1, the broader technical structure of the Nifty IT Index remains weak.

The index continues to trade below its key moving averages on the weekly timeframe, indicating that the primary trend remains under pressure.From a relative strength perspective, the index has moved from the Lagging quadrant to the Improving quadrant on the Relative Rotation Graph (RRG), suggesting that momentum is gradually building.

However, it continues to lack relative strength, indicating that sustained outperformance is yet to emerge.

Reinforcing the cautious outlook, the MACD remains below both the zero line and the signal line, highlighting the absence of meaningful bullish momentum.Historically, the 26,200–26,100 zone has acted as a strong demand area.

Between June 2022 and April 2023, the index witnessed multiple rebounds from this region, making it a critical long-term support zone.While intermittent pullbacks and short-covering rallies cannot be ruled out, a meaningful trend reversal is unlikely unless the index decisively reclaims the 29,000–29,100 zone, which also coincides with the previous swing high.

Until then, the broader technical bias is expected to remain cautious, with any relief rally likely to face selling pressure at higher levels.What is your technical view on TCS, Infosys and Kalyan Jewellers?

What strategy would you recommend for traders?TCS: The stock continues to trade below its key short- and long-term moving averages, indicating that the primary trend remains weak.

The RSI is hovering in the 40–45 zone, reflecting subdued momentum, while the rising ADX suggests that the prevailing bearish trend is strengthening with no clear signs of a reversal yet.

Additionally, the MACD remains well below the zero line, reinforcing the negative bias.

As long as the stock trades below the Rs 2,170–2,180 zone, the bearish outlook is likely to persist.

Traders should avoid aggressive long positions and wait for a decisive breakout above this resistance before turning constructive.Infosys: The stock attempted to move above its 20-day EMA on three occasions during the week but failed to sustain higher levels, closing lower each time.

The stock continues to trade below its key short- and long-term moving averages on both the daily and weekly timeframes, highlighting the prevailing weakness.

The weekly RSI remains below the 40 mark, indicating weak momentum and the absence of strong buying interest.

As long as the stock remains below the Rs 1,110–1,120 zone, the bearish bias is likely to continue.

Traders should maintain a cautious stance until the stock reclaims this resistance zone convincingly.Kalyan Jewellers: Shares have registered a fresh consolidation breakout on the weekly chart, backed by a sharp rise in trading volumes, lending credibility to the breakout.

The RSI has climbed above the 60 mark, signalling strengthening bullish momentum.

The stock has also closed above the upper Bollinger Band, a characteristic often observed during strong trending moves.

As long as the stock sustains above the Rs 425–430 zone, the bullish bias is likely to remain intact.

Traders may consider buying on dips while maintaining a stop-loss below this support zone.With the earnings season gaining momentum, should traders focus more on index F&O or stock-specific opportunities?

How should they approach the next few weeks?With the earnings season gaining momentum, we believe traders should focus more on stock-specific opportunities rather than index-based trades over the next few weeks.

Over the last couple of months, the broader market has consistently outperformed the frontline indices, with several midcap and smallcap stocks witnessing strong momentum and delivering meaningful breakouts.

In contrast, benchmark indices such as Nifty and Sensex continue to trade in a sideways range, reflecting a lack of clear directional conviction.

As earnings announcements gather pace, stock-specific volatility is likely to increase, creating opportunities driven by earnings surprises, management commentary, and sector-specific developments.

Therefore, traders should adopt a selective approach and focus on stocks exhibiting strong relative strength, positive price structures, and favorable earnings prospects, as they are likely to offer better risk-reward opportunities than taking directional bets on range-bound indices.What is the India VIX signalling about market volatility and sentiment for the coming week?India VIX continues to trade below its key short- and long-term moving averages, indicating that overall market volatility remains under control.

Although the volatility index surged nearly 26% on 8th July, when the Nifty plunged over 500 points and triggered a brief wave of panic, it has gradually cooled off over the past two sessions, coinciding with the recovery in the benchmark index.Since peaking at 28.90 on 30th March 2026 amid heightened geopolitical tensions between the U.S. and Iran, India VIX has been forming a pattern of lower highs and lower lows, reflecting a steady decline in fear and uncertainty.

This easing in volatility has provided significant support to the broader market.Technically, the 10.00–10.30 zone is a crucial support for India VIX.

A sustained move below this range would indicate further moderation in volatility and could help the equity markets remain stable.

On the upside, the 15.30–15.50 zone is expected to act as the immediate resistance.Overall, the current trend in India VIX suggests that market sentiment remains constructive, and the broader market is likely to stay steady in the coming week, provided there are no adverse developments that trigger a fresh bout of risk aversion or a short-term knee-jerk reaction.Which stocks are looking technically strong for next week, and why?Technically, Godrej Properties, DLF, Prestige Estates, Chennai Petroleum, PNB Housing Finance, and Indian Hotels are looking strong for the coming week.

These stocks are exhibiting positive price structures, strong relative strength, and bullish momentum, making them well placed to outperform the broader market in the near term.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own.

These do not represent the views of The Economic Times) ...