The Indian stock market witnessed a dramatic shift in sentiment last week, as initial euphoria gave way to a sharp correction. According to Sudeep Shah, Head of Technical Research and Derivatives at SBI Securities, the Nifty 50 index posted its most significant weekly decline since September 2025, falling nearly 2.5%. This has prompted a crucial question for investors: is this a healthy pullback or the start of a deeper trend reversal?
Technical Breakdown Signals Caution for Nifty and Broader Markets
The week that began on January 12, 2026, started with the Nifty scaling a fresh all-time high. However, the optimism was short-lived. The index reversed sharply, with a particularly telling pattern: it opened with a gap-down for four consecutive trading sessions, indicating sustained selling pressure.
Technically, the damage is significant. Shah points out that the Nifty has confirmed a neckline breakdown of an Adam & Adam Double Top pattern. Furthermore, it has decisively slipped below its 20-day and 50-day Exponential Moving Averages (EMA). The breach of the 50-day EMA is notable, as it had provided reliable support on four occasions since October 2025.
Momentum indicators have weakened considerably. The daily Relative Strength Index (RSI) has fallen below the 40 mark for the first time since September 2025 and continues to trend lower. This setup suggests bearish momentum may persist in the near term.
From a levels perspective, immediate support is seen in the 25,500–25,450 zone. A sustained move below 25,450 could trigger a sharper decline towards 25,200. On the upside, any recovery attempt will likely face strong resistance in the 25,900–25,950 range.
The weakness is broad-based. The Nifty Midcap 100 has slipped below its 20-day and 50-day EMA, while the Nifty Smallcap 100 is trading below all its key moving averages. This widespread deterioration signals a clear cooling of risk appetite, underscoring the need for a cautious and selective investment approach.
Bank Nifty Outperforms But Shows Warning Signs
The banking sector benchmark, Bank Nifty, showed relative strength last week, declining by nearly 1.5% compared to the steeper fall in the broader market. However, its weekly chart has flashed a caution signal with the formation of a Dark Cloud Cover candlestick pattern, suggesting a potential shift from bullish to bearish pressure.
The index has slipped below its 20-day EMA, and momentum indicators are losing strength. The daily RSI has crossed below its 9-day average, and the fast stochastic is below the slow stochastic line, indicating waning buying interest.
Key support for Bank Nifty lies in the 58,700–58,600 zone, which aligns with a recent swing low. A sustained break below 58,600 could intensify selling, potentially dragging the index towards 58,000 and then 57,500. Resistance on the upside is firm in the 59,700–59,800 band.
Expert Stock Recommendations: Alkem Labs and MTAR Technologies
Amid the volatile backdrop, Sudeep Shah of SBI Securities has identified two stocks with positive technical setups for potential outperformance.
For Alkem Laboratories Ltd (ALKEM), the technical outlook has turned positive. The stock has confirmed a downward-sloping trendline breakout, followed by a strong follow-through move. Its RSI has rebounded sharply from 37 to 63, reflecting a recovery in bullish momentum. The Average Directional Index (ADX) is rising, and the Moving Average Convergence Divergence (MACD) shows expanding green histogram bars, suggesting accelerating upside momentum.
Recommendation: Accumulate in the range of ₹5,800-₹5,790 with a stop loss at ₹5,620. The stock is likely to test ₹6,200 in the short term.
For MTAR Technologies Ltd (MTARTECH), the 50-day EMA continues to act as a strong dynamic support. The stock recently moved above its previous swing high of ₹2,719, rallying nearly 7% on high volumes, which signals strong participation. The RSI is in a rising mode near 70, and the MACD line has crossed above the zero line with expanding bars, indicating improving trend strength.
Recommendation: Accumulate in the zone of ₹2,690-₹2,680 with a stop loss at ₹2,605. The upside target is ₹2,875 in the short term.
(Disclaimer: The recommendations and views are those of the individual expert and do not represent the views of The Times of India. Investors are advised to consult certified experts before making any investment decisions.)
