It was a tug-of-war week for the broader market as the Nifty500 consolidated near key technical support, managing a late-week defense of its moving averages despite volatile intraday swings. Macro headwinds dominated the narrative, with escalating tensions in West Asia pushing crude oil back above $100 a barrel.

Last week’s market action reflected resilience in benchmark indices despite mixed global cues and signs of fatigue in the broader market after a strong run-up. Going into the coming week, traders should closely watch FII flows, inflation data, bond yields and sector rotation, as the market is increasingly rewarding selective stock picking over broad-based momentum.

Technical Analysis Perspective

• Daily trend structure remains constructive despite the recent pullback. After the sharp recovery from the March-April low, the index transitioned from a bearish LL-LH sequence into a bullish HL-HH structure. The latest decline has so far held near the prior higher-Low zone and around the rising 50EMA, suggesting this is still a corrective retracement within an intermediate uptrend rather than a confirmed trend failure.

• 20EMA vs 50EMA behavior indicates momentum cooling. Price has slipped below the 20EMA, showing short-term momentum loss, but the 50EMA is still rising and acting as support. Unless the recent swing low is violated decisively, the structure still favors consolidation and re-accumulation over renewed broad-based weakness.

• Weekly chart still lacks decisive trend leadership. The weekly structure continues to show a broad range with alternating HH-LH behavior rather than a clean sequence of sustained higher highs and higher lows. The inability to expand into fresh highs indicates the broader market remains selective and rotational underneath the surface.

Market Breadth

• Breadth has clearly improved from the March washout, but momentum is no longer broadening. % of stocks above the 10/30/50 EMA rebounded sharply from the low’s into April-May. However, all three breadth curves have now rolled over from overbought territory, indicating the market is transitioning from expansion to consolidation.

• Intermediate trend participation still remains healthy. Even after the recent pullback, nearly half the universe continues to hold above the 50EMA, while the 10EMA breadth has already started stabilizing. That is typically characteristic of a corrective pause within an improving market regime rather than the start of a broad structural breakdown.

• Leadership is narrowing, but not collapsing. Pocket pivot activity remains elevated and the 10EMA vs 20EMA crossover signal continues on “Stay,” suggesting institutional accumulation has slowed but not reversed. The sharp drop in stocks gaining >3% from May 19 highs reflects reduced upside velocity.

• Key inference: The market is likely entering a more rotational and selective phase after a strong breadth thrust. Index resilience may persist, but sustained upside from here will require breadth re-expansion and fresh leadership participation rather than reliance on a shrinking group of outperformers.

Trading & Investment Strategy

• Swing Traders: The market is entering a phase where stock selection and risk management become more important than aggressively chasing trades. With short-term breadth cooling off, focus on setups that continue to hold above rising 20EMA/50EMA structures with strong relative strength. Avoid extended breakouts and be willing to book partial profits quicker, as follow-through may become less consistent.

• Positional Traders: The broader evidence still supports maintaining a constructive bias. Use pullbacks into support zones and leading sector consolidations to gradually build exposure

Summary

The market continues to show evidence of structural improvement, supported by healthier intermediate-term breadth and improving trend structure. However, as the breadth expansion has slowed, upside participation is narrowing and the market is transitioning into a more selective, rotational environment rather than a broad-based momentum phase. The weight of evidence still favors maintaining a bullish intermediate-term stance, but with tighter execution, selective positioning and greater respect for risk management and situational awareness of the broader market.

How do you feel your portfolio is positioned to handle the current Geopolitical conflict triggered inflation risks?

The week was dominated by volatility rather than trend, as early weakness from higher crude, concerns of fuel-price hikes, and intermittent foreign selling was met by strong domestic buying and selective short covering in IT, pharma, telecom, and financials. The market did recover late in the week, but broader participation remained uneven, showing that mid- and smallcap pressure persisted even as headline indices stabilized, thereby resolving the divergences in the move of these indices against Nifty50. In short, by the end of the week, the market is in a consolidation zone with sellers active near higher resistance areas.

The week that it was…

• Crude and fuel prices stayed in focus, and the fears of domestic fuel-price hike hurt sentiment early in the week by reigniting inflation and margin concerns.

• Institutional flows were mixed: While FII flows swung sharply and only turned positive on May 14 after heavy selling earlier in the week, DII buying remained strong. However, that helped market recover but not fully reclaim the losses of the week.

Potential catalyst for the next week…

• Whether crude sustains at elevated levels or cools off will be the most important factor as that will directly affect inflation concerns, earnings outlooks, and foreign flows into Indian equities.

• FII behavior remains important after the recent whipsaw in daily flows; sustained buying from FIIs would be a strong confirmation that the recovery has more legs.

• Q4 earnings reactions will continue to matter where the market is currently rewarding stock-specific strength more than any broad index.

• Global cues, especially U.S.-China developments and the bond yields movement in the US, can influence the global sentiment.

Technical Perspective

Nifty500 chart

• On the daily chart, Nifty500 has broken below the recent swing low and slipped under the 50EMA, indicating deterioration in short-term trend structure. The rejection after making a recent higher high suggests sellers are becoming active near resistance zones.

• The 20EMA has started turning lower and price continues to trade below key moving averages, reflecting weakening momentum. Unless the index quickly reclaims the EMA zone, near-term rallies are likely to be a “Sell on Rally”.

• The support zone on the daily becomes the key tactical level. Holding this zone can lead to a stabilization attempt, while a decisive breakdown would increase the probability of a deeper corrective move.

• However, the weekly chart reflects repeated hesitation near resistance with lower highs forming after the rebound. This indicates weakening momentum and raises the possibility of a broader consolidation phase unless the resistance zone is convincingly reclaimed.

Market Breadth

• Market breadth has weakened sharply with the percentage of stocks above the 10EMA dropping to 28% from overbought territory recently. This reflects rapid loss of near-term momentum across the broader market.

• The medium-term breadth remains relatively healthier, with 51% of stocks still above the 30EMA and 57% above the 50EMA. This suggests the broader trend damage is not yet severe despite the recent pullback.

• Pocket pivot activity has steadily declined through the week, falling from 132 stocks on May 11 to 70 on May 15. This indicates waning institutional accumulation and reduced buying conviction.

• The number of stocks gaining more than 3% remains muted at just 105 names on May 15, while 180 stocks declined more than 3%. This points to negative participation and weak upside expansion beneath the index level.

• The overall breadth setup suggests the market is transitioning from a broad-based rally phase into a more selective and cautious environment, where stock picking and risk management become increasingly important.

Trading & Investment Strategy

• The short-term setup has weakened with Nifty500 slipping below its key moving averages, deterioration in market breadth, and a sharp drop in the percentage of stocks above the 10EMA. With pocket pivot participation also declining through the week, broad-based momentum appears to be fading.

• Swing traders would be better served by staying selective, reducing aggressive long exposure, and focusing on stocks showing relative strength and strong volume-supported setups.

• For positional traders, the weekly structure still remains constructive with higher lows intact and over 50% of stocks continuing to trade above their 30EMA and 50EMA. This suggests the market is undergoing a corrective or consolidation phase within a broader recovery structure rather than signaling a confirmed long-term trend breakdown.

Summary

The market appears to be transitioning from an easy liquidity-driven rally into a more nuanced phase where participation is narrowing and price action is selective. While the higher timeframe structure continues to hold, the short-term internals are flashing caution through weakening breadth, fading momentum, and reduced institutional accumulation signals.

In such an environment, disciplined execution, tighter risk management, and a strong focus on stock-specific strength become far more important than broad market optimism.

Large-cap stocks reflected narrow leadership, while the real party happened in the mid and small-cap space, which had broader participation and stronger conviction. Investors aggressively bought into the mid-cap and small-cap spaces. The Nifty500 advanced by 1.9% over the week, with small and mid-cap indices rising by over 3.5% each.

Key triggers in the week

• Geopolitical Tensions Kept Markets on Edge: Escalation near the Strait of Hormuz triggered fears of supply disruption, pushing crude oil back above $100/barrel and weakening the Rupee toward ₹95/$.

• Earnings Season Drove Market Leadership: Q4 FY26 results remained the key stock-specific trigger, with strong earnings and guidance sharply outperforming while misses saw aggressive selling pressure.

• Domestic Flows Cushioned FII Selling: Continued DII buying helped absorb persistent FII outflows, supporting broader market resilience.

• Crude and Rupee Remain Key Risks: Elevated oil prices and Rupee weakness continue to be the biggest macro headwinds, influencing inflation expectations, RBI policy outlook, and foreign investor sentiment.

Potential catalyst for the next week…

• Will Crude Sustain Above the Panic Zone? Markets have already reacted to the initial oil spike. The focus now shifts to whether crude stabilizes or continues higher, which could materially alter market sentiment.

• Can Nifty Hold Despite FII Pressure? Market resilience despite weak global cues would be an important sign of underlying strength. Traders should watch whether domestic liquidity continues to absorb foreign selling.

• Broader Market vs Index Divergence: While index heavyweights remain under pressure, participation in midcaps and sector-specific pockets will be closely watched for signs of continued risk appetite.

• Earnings Reactions Matter More Than Earnings: As the season progresses, management commentary, future guidance, and market reaction to results may become more important than the headline numbers themselves. After all, Good results may not be “good enough” if expectations are too high. Read why this matters in the blog below.
  
  

Technical Perspective

• Nifty500 extended its recovery and continued to maintain a Higher High-Higher Low structure, signaling improving short-term trend strength.

• Broad market participation remained healthy, with price sustaining above both the 20EMA and 50EMA after the recent rebound.

• However, price is now approaching an important resistance zone from the previous consolidation area, which may lead to some near-term consolidation or profit booking.

  

• With nearly 75-85% of Nifty500 stocks trading above their 10EMA, 30EMA, and 50EMA, market breadth continues to remain strong.

• The 10EMA staying above the 20EMA favor a ‘buy on dips’ approach.

• Pocket pivot activity remained elevated through the week, suggesting continued institutional accumulation and healthy momentum despite global macro concerns.

• Short-term breadth, however, has cooled slightly from extremely overbought readings seen in late April, indicating the possibility of some consolidation, rotation, or stock-specific action rather than a straight-line rally next week.

Accessing Market Breadth on Pro-Setups Dashboard is available for all readers. Click on the link below.

Market Breadth on Pro-Setups Dashboard

Trading & Investment Strategy

The broader market structure remains constructive despite macro headwinds from crude oil, currency weakness, and FII selling. Traders should continue focusing on stock-specific opportunities driven by earnings, relative strength, and improving breadth. With market breadth still looking healthy, a “buy on dips” approach remains favorable, but position sizing and risk management become important as the market approaches key resistance zones and short-term overbought conditions.

Summary

Indian markets displayed notable resilience through the week, without any material damage to the market structure. Strong domestic liquidity, healthy market breadth, and continued momentum in select sectors indicate that risk appetite remains intact, although the next phase of the rally is likely to be more selective and earnings-driven rather than broad-based.

As a trader, we are always on the lookout for effective ways to gain an advantage in the market. These ways are often based on combining different tools or indicators that we use to create a trading strategy.

Of all the indicators, moving averages are the most popular and versatile indicators that are applied to various markets and timeframes. In this article, we will focus on one specific moving average - the 50-day exponential moving average (50EMA) - and explore how using it correctly can amplify your swing and positional trading success. We will not cover any strategy that traders use. However, we will highlight how the rising 50EMA can be added to any such strategy for taking long trades than a simple filter where price is above the 50EMA.

The 50-day exponential moving average (50EMA)

Moving averages help filter out short-term price fluctuations and reveal the underlying trend. By plotting moving averages on your charts, you can easily identify whether the market is in an uptrend, downtrend, or sideways.

The 50EMA is a medium-term moving average that provides a balance between responsiveness and reliability. It is widely followed by traders and investors to gauge the overall trend of an asset.

Compared to shorter-term moving averages, such as the 20EMA, the 50EMA is less sensitive to short-term price fluctuations. This means it provides a more reliable indication of the overall trend. On the other hand, compared to longer-term moving averages, such as the 200EMA, the 50EMA is more responsive to recent price changes.

Renowned traders like Mark Minervini and William O’Neil have incorporated the 50EMA into their trading methodologies. Minervini emphasizes buying stocks that are in sync with the market and have a strong price structure, including the 50EMA. Similarly, O’Neil, famous for the CANSLIM approach, relies on this moving average as a key factor in identifying leading growth stocks during uptrends.

Importance in Positional Trading

Positional traders take a longer-term approach, aiming to capitalize on larger price moves that may last for several weeks to months. The rising 50EMA is valuable in this style of trading for the following reasons:

• Trend Continuation: Positional traders look to ride strong trends, and the rising 50EMA provides a continuous indication of the market’s health. As long as the price remains above the rising moving average line, it confirms the bull market’s momentum, reinforcing the decision to stay invested for an extended period.

• Timing of Exits: As trends are not everlasting, traders need to know when to exit a position and lock in profits. The crossing of the price below the rising 50EMA can serve as an early warning signal, indicating a potential trend reversal. This allows positional traders to take profits or implement protective measures to preserve gains.

Importance in Swing Trading

Swing traders aim to profit from short to medium-term price swings within an established trend. The rising 50EMA plays a vital role in this strategy, primarily in two ways:

• Trend Identification: In an uptrend, the price typically remains above the rising 50EMA. Observing the price staying consistently above this line confirms the bullish trend and provides traders with a reliable signal to enter long positions. Conversely, in a downtrend, the price will often stay below the declining 50EMA, signaling potential short-selling opportunities.

• Pullback Confirmation: As pullbacks are common in trending markets, the rising 50EMA acts as a support level during uptrends. When the price pulls back to this moving average line and holds, it presents an attractive buying opportunity for swing traders, offering a lower-risk entry point in the direction of the prevailing trend.

• Momentum Trading: Pullbacks to rising 50EMA is not the only strategy followed by swing traders. When the uptrend is strong, momentum traders trade bull flags, pullbacks to 10EMA & 20EMA, IV-pause-move and many other setups for short bursts of upswings. Here also, the underlying criteria that the 50EMA should be rising is important.

If you examine the chart of CYIENT Limited, you will see that multiple successful trading setups could have been executed on the rising 50EMA. Conversely, ignoring the declining moving average would have spared the trader from unnecessary stop losses and frustration.

A simple strategy that can enhance the performance of swing traders is to follow the direction of the 50EMA on Nifty500. By staying in the market when Nifty500’s 50EMA is rising and avoiding long positions when it is declining, swing traders can significantly improve their returns.

Pro-Setups and the Rising 50EMA

In the Pro-Setups indicator on TradingView, you see the 50EMA as a green line when it is rising and as a red line when it is declining.

In the Pro-Setups Dashboard, there are options to scan for

• stocks where 50EMA is rising,

• stocks where 50EMA has just turned green in last 2 days, and

• stocks away from 50EMA at a certain percentage distance.

The Rising 50EMA filter can be used as an add-on to your existing scan. Combine it with filters like green trend bars, relative strength, fundamental score, mini coil, Bollinger band width, TTM squeeze etc.

The New Rising 50EMA (in last 2 days) scan gives you those names where 50EMA has turned green in the last 2 days. This enables you to find gainers early.

Stocks away from 50EMA filter lets you find stocks at a certain percentage distance away from 50EMA. This helps in finding stocks with momentum.

Conclusion

The rising 50EMA is a powerful tool in the arsenal of swing and positional traders alike. Its ability to identify trends, confirm pullbacks, and act as a dynamic support level during uptrends provides traders with critical insights for making well-timed trading decisions. By incorporating it into their trading strategies , traders can increase their success ratio.

Remember, a rising moving average line isn’t a guarantee of profit, but it serves as a valuable guide to navigate the market’s currents with greater precision.

Large-cap stocks reflected narrow leadership while the broader market showed stronger conviction demonstrating a recovery in risk appetite among investors despite headline index caution.

Key triggers in the week

• Broad Market Risk Appetite Strengthens: FII selling created an overhang in index heavyweights, but consistent DII absorption limited downside.

• Crude Oil Remains Elevated: Brent holding above $110 remains the key macro risk, keeping inflation expectations, currency pressure, and FII behavior on edge.

• Rupee Under Pressure: The rupee slipping to fresh lows (~₹95/$) reflects persistent external stress and raises the risk of continued FII caution, capping upside in large caps.

Potential catalyst for the next week…

• Crude Oil Remains the Key Variable: A move below $100 could ease inflation and currency pressure, while sustained higher level keeps macro risks elevated.

• Earnings Momentum & Sectoral Cues: · As results gather pace, the focus shifts to margin resilience and demand outlook. Stocks are likely to react more to guidance than reported numbers, driving sharper sectoral rotation..
  
  You can track the Upcoming Results on our “Upcoming Results” menu on the “Financial Insights” tab on our dashboard.

Technical Perspective

• Nifty500 has transitioned from an aggressive ‘V-shaped’ recovery into a healthy consolidation phase. After April delivered one of the strongest monthly performances in recent history, the index is now focused on base-building and structural repair.

• Dynamic Support Defense: The index is currently taking support at a high-probability confluence zone. This area aligns with the rising 50EMA (which has recently turned green) and previous historical support levels.

• Bullish EMA sync: The short-to-medium-term moving averages have returned to a bullish alignment. The 10EMA is now positioned above the 20EMA, which in turn sits above the 50EMA (10EMA > 20EMA > 50EMA).

• After forming a fresh Higher High (HH) following the April rally, the current price action is attempting to establish a Higher Low (HL), confirming that the ‘Buy on Dips’ regime is back in control.

• On the weekly timeframe, the index is successfully re-establishing itself within the broad consolidation range it occupied throughout the latter half of 2025, suggesting a return to long-term structural stability.

• From a medium-term perspective, the market continues to exhibit underlying strength. With 73% of companies trading above their 50EMA, the broader market structure remains intact. The current environment is characterized by selective participation rather than a breakdown, as the majority of the index still holds its primary trend.

• From a short-term view, the market continues to cool off, with the percentage of stocks above the 10EMA slipping (59% currently), though the decline is not sharp compared to last week (60%).

Accessing Market Breadth on Pro-Setups Dashboard is available for all readers. Click on the link below.

Market Breadth on Pro-Setups Dashboard

Trading & Investment Strategy

The market appears to be taking a healthy breather within a broader recovery trend. Medium-term breadth remains strong, while short-term momentum is cooling off as expected. In this phase, it’s better to avoid chasing breakouts aggressively and instead be selective and focus on stocks that are holding key support levels and showing relative strength. New entries should be considered mainly in leading sectors, only after support holds or momentum picks up again, while keeping position sizes controlled during this consolidation.

Summary

Despite the volatility seen on Thursday, the broader market structure remains intact, with no signs of a major breakdown so far. This phase is helping the market build a stronger base after the sharp recovery in April. Staying patient and disciplined is important, as the next clear move is likely to come once this consolidation phase plays out.

Indian benchmark indices ended the week sharply lower, snapping a multi-week recovery amid IT earnings disappointment, geopolitical tensions in the Middle East, rising crude prices and rupee depreciation. Profit-booking after a strong prior rally accelerated the correction. However, mid-cap and small-cap indices proved more resilient. The broader index Nifty500 closed the week down 1.3%, reflecting broad-based weakness tempered by selective buying in value pockets.

Key triggers in the week

• Geopolitical Tensions: Stalled US-Iran talks raised concerns over supply disruptions via the Strait of Hormuz, pushing risk premium higher and triggering a broad risk-off sentiment.

• Rising Crude Oil Prices:
  Brent crude surged from ~$84 to above $100, with markets reacting to the speed and sustainability risk of the move, given India’s heavy import dependence.

• Currency Weakness & FII Outflows:
  The Indian Rupee weakened past ₹94/USD as capital moved into the US Dollar, while the FIIs turned sellers once again with flows gravitating toward stronger momentum markets like the NASDAQ Composite that are making new highs.

• Weak Internals:
  While broad-based selling and breakdowns in market leaders signaled a clear shift to distribution, the Nifty IT Index in particular faced the wrath as it fell over 10%, dragging indices lower.

Potential catalyst for the next week…

• Crude Oil Direction Remains Critical:
  Markets will continue to anchor around crude movement, with any cooling below $100 easing inflation and sentiment concerns, while sustained strength could keep pressure on equities and delay risk-on flows.

• Currency Stability & FII Flows:
  Stability in the Indian Rupee will be key to arrest FII selling, as continued weakness alongside strong momentum in markets like the NASDAQ Composite could prolong outflows.

• Earnings Momentum & Sectoral Cues:
  As results gather pace, focus will remain on margin resilience and forward guidance, with management commentary likely to drive sectoral moves.
  
  You can track the Upcoming Results on our “Upcoming Results” menu on the “Financial Insights” tab on our dashboard.

  

Technical Perspective

• This week, the Nifty500 paused its sharp V-shaped recovery, transitioning into a healthy pullback after the strong rally from early April lows.

• The index is now testing a key support zone marked by the confluence of prior swing levels and the rising 50EMA, which has recently turned supportive (turned green).

• While the 20EMA continues to slope upward, reflecting short-term strength, it remains below the 50EMA - indicating that the broader market structure is still in a recovery phase rather than a confirmed uptrend.

• From a trading perspective, this setup calls for patience, with confirmation required through a sustained hold above the 50EMA before considering fresh directional positions.

• On the weekly timeframe, the index is successfully re-establishing itself within the broad consolidation range it occupied throughout the latter half of 2025, suggesting a return to long-term structural stability.

• Medium-Term Breadth Remains Strong, Short-Term Cooling Visible:
  While ~78% and ~71% of stocks continue to trade above their 30EMA and 50EMA respectively, the sharp drop in stocks above the 10EMA (~60%) indicates a cooling of short-term momentum. This suggests a pause after an extended move rather than a structural breakdown.

• Healthy Reset, Not Distribution: The pullback in short-term breadth reflects a necessary reset from overbought conditions, with broader participation still intact. The absence of a sharp deterioration in 30/50EMA breadth signals that the market is consolidating, not entering a corrective phase.

• Participation and Leadership Still Intact: The continued presence of a high number of >3% movers and strong readings across key breadth indicators indicate that market participation remains broad. This reduces the likelihood of a deep correction, though near-term consolidation remains likely.

Accessing Market Breadth on Pro-Setups Dashboard is available for all readers. Click on the link below.

Market Breadth on Pro-Setups Dashboard

Trading & Investment Strategy

The market is undergoing a healthy pause within a broader recovery, with medium-term breadth intact but short-term momentum having it’s much needed cooling. In this environment, traders should shift from aggressively chasing breakouts to a more selective approach, focusing on stocks holding key supports and showing relative strength. Fresh positions are best considered in stocks from the leading sectors only on confirmation of support holds or renewed momentum, while avoiding overexposure during this consolidation phase.

Summary

Despite last week’s volatility, the broader market structure remains constructive, with no signs of a systemic breakdown as yet. The current phase appears to be a necessary reset rather than the start of a deeper correction, allowing the market to build a stronger base. As always, patience and discipline remain key, with the next directional move likely to emerge once this consolidation matures.

Listing: February 2025

Sector: Power

Industry: Power Infra, Trans. Equipment & Services

Business Overview: ⁠Incorporated in 2001, Quality Power Electrical Equipment Limited (NSE: QPOWER) is engaged in the business of energy transition equipment and power technologies. The company provides high-voltage electrical equipment and solutions for grid connectivity and energy transition, specializing in power products across generation, transmission, distribution, and automation sectors. The company manufactures critical high-voltage equipment for High Voltage Direct Current (HVDC) and Flexible AC Transmission Systems (FACTS) networks. These equipment and networks form key components for energy transition from renewable sources to traditional power grids.

Recent Gains: In the last two weeks, the stock has moved up by around 38% (from ₹871.65 on 2nd April to ₹1,206.05 on 17th April).

In this post, we break down the conditions that were present before this move started, and how similar opportunities can be identified for a portfolio.

Here is the recent chart of the company, and highlighted is the move that we are studying.

We will focus on the setup that existed just before the breakout, especially the few days leading up to 2nd April.

Prior Upmove & Base Formation

The stock had already shown strong strength earlier, rallying nearly 300% between April 2025 and September 2025.

After that, it entered a consolidation phase from October 2025, before eventually moving to new all-time highs this week.

During this consolidation, the 50EMA had turned red but recently shifted back to green. Trading on the long side only when the 50EMA is green is a simple but effective way to improve trade quality.

Sector Strength

As of 2nd April, the Power sector was showing strong performance across both 3-month and monthly timeframes, ranking among the top sectors.

• 3-Month RS: 60

• Monthly RS: 66

While the sector was already strong, QPOWER was relatively quiet - a common sign of stocks preparing for a move.

Relative Strength against other stocks

• On 2nd April, QPOWER showed strong relative strength across multiple timeframes, even as the broader market was weak:

  • 1 Week RS: 74

  • 1 Month RS: 84

  • Quarterly RS: 96

• A Quarterly RS of 96 means that the stock outperformed 96% of the stocks in our trading universe, while only 4% outperformed it.

  Relative Strength (RS) Rating

Relative Strength vs Nifty 500

• In March, the broader market declined by more than 10%, but QPOWER remained largely flat - a strong sign of resilience.

• At the same time, its RS line started making new 21-day highs even before price did. This early strength often signals potential leaders.

• This is where relative strength becomes most useful. When the market is weak, instead of sitting idle, the focus should be on stocks that are holding up well. These are often the ones that lead the next upmove.

Relative Strength (RS) Line

Technical Factors

• Green trend on Daily timeframe (Weekly trend was Yellow because of limited trading history of the stock necessary for its calculation).

• Rising 50EMA. A simple way to manage risk is to only consider long positions when the 50EMA is rising.

Importance of Rising 50EMA

• TTM Squeeze signaled that pressure was building up, and once the stock started moving, that built-up energy got released. While not a critical factor, it added extra strength to the setup.

TTM Squeeze

Fundamental Factors

• Fundamental Score: 88

  

  The Fundamental Score is our proprietary rating, built on the company’s quality and its recent growth. A high score indicates that the company meets the key financial metrics typically used for fundamental evaluation.

  Read more about Fundamental Score

• Valuation Grade: A+

  Pro-Setups proprietary valuation grading rates stocks from A+ to E, where A+ represents the most attractive valuation and E signals the least.

  Valuation Grading

• Company qualified for Easy Earnings Comparison filter. This is one of the most important fundamental filters. Companies that satisfy this criteria can report blockbuster earnings in the upcoming quarterly results.

  Easy Earnings Comparison

What Happened Next

Following the easing of tensions between the United States and Iran after the ceasefire around 7-8 April, global sentiment improved and markets started to recover. As the broader market picked up post 6th April, QPOWER responded strongly, rallying over 38% in a short span. This move clearly showed how all the factors in the setup - sector strength, relative strength, fundamentals, and technical structure came together and played out effectively once the market environment turned supportive.

How can Pro-Setups Help to Identify such Setups

Identifying such high-quality setups manually can be time-consuming and often inconsistent. This is where the Pro-Setups Dashboard makes the process much simpler and more structured.

All the key factors we discussed - whether it is sector strength (Sectoral RS), stock-specific Relative Strength, or technical signals like Green Trend, Rising 50EMA, RS Line, and TTM Squeeze, are readily available within the dashboard. On top of that, important fundamental filters such as Easy Earnings Comparison and Valuation Grade are also built in.

You can bring all these conditions together in one place and quickly narrow down stocks that meet your criteria. This helps you focus only on those names that are quietly building strength, even before the move becomes obvious.

If you are serious about finding strong setups early, the Pro-Setups Dashboard can significantly improve both your speed and decision-making. Use the link below to subscribe to Pro-Setups today!

Use code JOINNOW for 20% Discount

Which stock, in your view, deserves the title of Chart of the Week? Let’s discuss your picks, ideas, and reasoning in the Pro-Setups Discussion Group and learn together!

The Indian equities extended their strong gains for a second straight week, driven by a sharp improvement in global risk sentiment. Easing geopolitical tensions in the Middle East triggered a notable correction in crude oil prices - an important tailwind for an import-dependent economy like India. Falling yields and a steady foreign inflows further supported the move. Notably, the rally broadened meaningfully, with mid- and small-cap indices outperforming benchmarks, signaling a revival in risk appetite rather than a narrow large-cap led bounce.

Key triggers in the week

• Geopolitical De-escalation: The announcement of a ceasefire between Israel and Lebanon, coupled with reports of potential progress in U.S.-Iran talks, significantly boosted global risk appetite.

• Softening Crude Oil Price: Brent crude fell to around $85 per barrel from the highs of $113 since the Middle East tensions started. For an import-dependent economy like India, this eased pressure on the rupee.

Potential catalyst for the next week…

• Crude oil trajectory remains the fulcrum: Markets will closely track developments in the Middle East, but the real catalyst is the crude. Any material progress that contains the supply risks could push oil prices lower, reinforcing the current risk-on sentiment. Conversely, any escalation or breakdown in diplomacy that threatens supply could quickly reverse flows, making crude the single biggest macro risk to the ongoing rally.

• Liquidity and flows- silent but decisive: With FIIs showing signs of stability, their continuation (or reversal) will be crucial in sustaining market momentum. Domestic flows remain supportive, but incremental upside from here will likely need confirmation from sustained FII participation.

• Earnings quality over earnings growth: As the results season gathers pace, the focus will shift to the quality of earnings - margin resilience, demand commentary, and forward guidance for FY27. Management cues on input cost trends and supply-chain stability, especially in the context of recent geopolitical volatility, will play a critical role in shaping sectoral leadership.
  
  You can track the Upcoming Results on our “Upcoming Results” menu on the “Financial Insights” tab on our dashboard.

Technical Perspective

• The Nifty500 has staged a strong recovery this week, reclaiming its 20EMA and 50EMA while also breaking above the March swing highs - signaling a return of short-term bullish control.

• However, the broader structure is still in repair. Despite the 10EMA turning up and crossing above the 20EMA, both remain below the 50EMA, indicating that this is an early-stage recovery rather than a confirmed uptrend.

• For traders, this suggests a “buy on dips, avoid chasing” environment until the trend strengthens further.

• Weekly chart: The index is now reestablishing itself within the broad consolidation range it occupied during the latter half of 2025.

• Market breadth remains exceptionally strong, with 96% of stocks above the 10EMA, reflecting sustained short-term momentum. More importantly, participation has expanded meaningfully across timeframe - stocks above the 30EMA have risen to 93% (from 82%), while those above the 50EMA have surged to 83% (from 62%), confirming a broad-based strengthening of the underlying trend rather than a narrow, large-cap led move.

• That said, such elevated breadth readings also push the market into a near-term overbought zone. While the trend remains resilient, the risk of short-term exhaustion is rising, suggesting a pause or consolidation is more likely than a continued vertical move, and chasing strength at this stage carries unfavorable risk-reward.

Accessing Market Breadth on Pro-Setups Dashboard is available for all readers. Click on the link below.

Market Breadth on Pro-Setups Dashboard

Trading & Investment Strategy

The market’s sharp two-week rally is encouraging, but a move of this magnitude will eventually need rest. The market will either work off its extension by moving sideways or price-correct with a pullback before the next leg higher. Either outcome would be healthy and improve the longevity of this upswing. Chart structures still need more time to form constructively, most stock charts show V-shaped price movement. Breadth indicators have entered potential overbought territory - a sign of likely exhaustion ahead. Conservative swing traders should patiently wait for quality setups to emerge post-consolidation. Avoid FOMO and chasing prices here; instead, plan entries on the next pullback or sideways consolidation.

Summary

Improving geopolitical sentiment has turned into a meaningful tailwind for equities. Against that backdrop, Indian equity market is showing an aggressive short-term bullish structure, and the jump in the % of the stocks trading above their 50EMA suggests this rally is being supported by broad participation. Even so, after such a sharp move, the market looks extended and likely needs time to digest gains. That can happen either through sideways consolidation (a.k.a Time correction) or a pullback (a.k.a Price correction), both of which would be healthy for sustaining the next leg higher.

With many stocks showing V-shaped recoveries and breadth entering potentially overbought territory, conservative traders and investors should avoid chasing strength and wait for better risk-reward entries after some cooling off.

The Indian equity markets staged a spectacular recovery this week, snapping a grueling losing streak since the start of 2026 to post their best weekly performance since February 2021. The rally was primarily fueled by a fragile and yet, a dramatic de-escalation in West Asian tensions after the U.S. and Iran agreed to a two-week ceasefire, coupled with a neutral and supportive stance from the RBI’s Monetary Policy Committee. For the week, the Nifty 500 index delivered a robust performance, closing 6.7% higher, reflecting a broad-based participation across the market cap segments, with the Midcap index clearly taking the lead with a gain of 7.6%.

Key Indices Performance

Key triggers in the week

• Geopolitical De-escalation: The primary catalyst was the announcement of a two-week truce between the U.S. and Iran. This significantly lowered the “risk-off” sentiment globally, leading to a sharp cooling of crude oil prices from over $111 to the $95–$97 range. Since India is a major oil importer, this stability provided a massive tailwind for domestic macro-stability and equity valuations.

• RBI Monetary Policy Stability: The Reserve Bank of India (RBI) maintained the repo rate at 5.25% and shifted to a ‘Neutral’ stance, further aiding the positive sentiment.

Potential catalyst for the next week…

• Islamabad Diplomatic Talks: Markets will closely monitor the upcoming diplomatic discussions in Islamabad, led by U.S. Vice President JD Vance and Iranian officials. The outcome of these talks will determine the durability of the current ceasefire and whether a long-term regional peace framework is viable.

• Q4 FY26 Earnings Momentum: The earnings calendar intensifies next week with heavyweights like Wipro (April 16) and HDFC Bank (April 18) scheduled to report. Investors will scrutinize management commentary regarding demand outlook for FY27 and the impact of recent geopolitical volatility on supply chains.
  
  You can track the Upcoming Results on our “Upcoming Results” menu on the “Financial Insights” tab on our dashboard.

Sectoral Snapshot: Leadership & Momentum

Technical Perspective

The Nifty 500 has demonstrated a strong “V-shaped” recovery, closing the week at approximately 22,130. On the weekly chart, the index formed a commanding bullish candlestick for the first time in 2026. This suggests that the corrective phase, which saw the index drop significantly from its 52-week high of 24,144, has most likely found a definitive floor.

Breadth Comparison & Inference

The Nifty 500 is currently witnessing a notable momentum shift in short-term participation that suggests an improvement in market sentiment, where stocks are reclaiming their near-term levels. Currently 95% of the stocks are trading above their 10EMA, compared to just 59% last week, while 82% of the stocks are trading above their 30EMA, compared to just 25% last week. This indicates that while the Nifty500 is yet to stage a clear uptrend structure, a recovery is taking root from the bottom up.

Structural Health and Technical Inferences

As per our technical rules, the market has officially regained its structural strength, as the percentage of stocks above the 50-day EMA is now comfortably above the crucial 50% level. This marks a decisive shift from the fragile structure observed at the start of the week. Furthermore, Since participation levels across the 10, 30, and 50-day EMAs are above the 15% mark, the Nifty500 is classified as to have moved out of the oversold zone.

Accessing Market Breadth on Pro-Setups Dashboard is available for all readers. Click on the link below.

Market Breadth on Pro-Setups Dashboard

Trading & Investment Strategy

• While the market breadth has improved notably, the Sharp V shaped recovery last week and as Nifty500 is just around the previous Support turned Resistance zone, some “cooling off” can be expected in the early part of next week. Potentially, the market may do a retracement, clock a Higher Low, before attempting to take over this resistance levels.

• Given March’26 results are expected in the coming week, traders can look to take advantage of the filter “Results Impact on Price” and focus on stocks filtered through Easy Earnings Comparison and Power Earnings Gap filters on the “Financial Filters” on the Pro-Setups Dashboard. You can learn more on how to trade EEC stocks from this blog Identify Tomorrow's Earnings Rockstars today.

• Swing Traders: Given the higher % of stocks above the 10EMA and 30EMA, it might be a better approach to wait for pullback in leading stocks instead of chasing them at the current levels.

• Positional Traders: Traders/Investors with a longer term horizon may still choose to stay on the sidelines and wait for Nifty500 to get a clear uptrend structure of Higher High, Higher Low before committing their capital. It’s best we do not fall for FOMO and chase these initial rally but instead wait for the confirmation. If the uptrend did happen, it is going to be a long game and so missing these initial rally is not a bad thing at all. It’s best to be conservative in the beginning and go full throttle once we have a signal of a clear uptrend than fall for the FOMO and chase every move and get chopped out.

Summary

While the market breadth has shown signs of strength and giving hope that the bottom has been made, the fragility of the geopolitical peace and the resultant impact on our larger economy and on the market, calls for a careful and staggered approach to committing capital. With the results starting to pour in, Investors should stay selective, focusing on high-quality names with strong valuation comfort while allowing the market to prove its intent through sustained follow-through.

Key Indices Performance

The standout divergence came from Nifty SmallCap 250, that closed in the green at +0.5%, signaling selective buying interest in the small-cap space even as large and mid caps faced selling pressure.

With the recent correction, many small-cap stocks are now available at attractive valuations compared to their earlier premiums, making them increasingly appealing to investors looking to build positions at more reasonable entry points. To put this in perspective, there were 341 companies on March 4 that had a valuation grading of A and A+ combined. That list has soared to 454 companies on April 4 - a clear sign that the correction has opened up a wider pool of fundamentally sound stocks trading at compelling valuations.

Read more about our proprietary Valuation Grading score in the links mentioned below.

Key Drivers for the Market

Overall sentiment remained weak, with the Middle East conflict and sharp moves in energy prices keeping risk appetite in check. Major global markets, including the US and other developed economies, also ended the week on a mixed to negative note.

• Geopolitical Escalation in West Asia: The ongoing US-Israel conflict with Iran, now in its fifth week, continued to escalate, keeping uncertainty elevated. Any further escalation or a potential de-escalation in the US-Iran conflict will remain the biggest driver for global oil prices and equity sentiment in the coming days.

• Rupee Recovery & RBI Intervention: The Indian rupee staged a dramatic recovery this week, appreciating by over ₹2 to close at 92.67 driven by RBI’s strategic actions to curb speculation and volatility. This rupee strength provided a much-needed circuit breaker to the downside and triggered a sharp recovery in market on Thursday.

• Crude Oil Price Shock: After falling to $97 per barrel this week, crude prices climbed back above $106 per barrel. For India, higher oil prices increase the import bill, push inflation higher, and put pressure on corporate margins leading to a negative impact on market sentiment.

• RBI MPC Meeting (April 6-8): The Reserve Bank of India's first policy meeting of FY27 is the primary domestic trigger. Markets are closely watching RBI’s commentary for any shift in the neutral stance or guidance on liquidity management given the recent spike in crude-led inflation.

• Corporate Earnings Season Kick-off: With the financial year coming to a close, focus now shifts to corporate earnings. Investors will closely track how companies performed in the last quarter of FY26 and how they factor in rising energy costs and currency weakness while giving guidance for FY27.

Technical Perspective

• Establishment of Lower Low (LL): Nifty500’s recent price action has established a fresh Lower Low (LL).

• Strong Resistance from 10EMA: The Nifty500 continues to show strong downward momentum, repeatedly facing resistance near the falling 10EMA..

The reason we track Nifty500 is because it represents over 90% of the free float market capitalization, making it a comprehensive barometer of market health.

Breadth Comparison & Inference

The Nifty 500 is currently witnessing a notable momentum shift in short-term participation. At present, 59% of stocks are trading above their 10EMA, a sharp climb over the 19% seen a week ago on March 28. This surge suggests an early improvement in market sentiment, where stocks are beginning to reclaim near-term levels even as the index price remains lower than its previous weekly close. The medium-term health is also showing signs of life, with 30EMA participation rising to 25%, compared to 14% last week. This indicates that while the broader trend has been under pressure, a recovery is attempting to take root from the bottom up.

Structural Health and Technical Inferences

When analyzing the deeper framework, the market continues to exhibit a fragile structure. Currently, only 19% stocks are trading above their 50EMA. Based on quantitative benchmarks, because this figure remains significantly below 50%, the market fundamentally lacks structural strength. This disparity between short-term momentum (59% above 10EMA) and long-term health (19% above 50EMA) indicates that the recent recovery is likely driven by tactical mean-reversion rather than broad-based institutional accumulation. Since participation levels across the 10, 30, and 50-day EMAs are no longer all below 15%, the index is no longer classified in a potential oversold zone.

Summary of Nifty500 Performance

The Nifty500 ended the week at 20,938, a 0.4% decline from previous week’s 21,020. While we see a clear breadth expansion in short-term indicators, the “Curtail” signal on the index’s 10EMA vs 20EMA crossover serves as a lack of confirmation for a primary trend reversal. In essence, we are seeing a gradual improvement in daily participation, but the underlying weakness in the 50EMA suggests the broader trend remains cautious. For this move to be sustainable, we require a strong follow-through that pushes more stocks back above their long-term averages.

Accessing Market Breadth on Pro-Setups Dashboard is available for all readers. Click on the link below.

Market Breadth on Pro-Setups Dashboard

Execution Alpha: For the disciplined investor, the priority is to identify high-quality names with healthy valuation comfort (Valuation Grade A+, A and B+ in the Pro-Setups Dashboard) that have maintained relative strength despite the broader index breakdown.

Summary

While short-term breadth indicators are showing signs of improvement, the broader market structure remains fragile with the index still lacking structural strength. That said, there is a degree of softness in the bearish narrative as the market appears to be attempting a rise from the bottom up. However, for this recovery to gain credibility, Nifty500 must first navigate a series of overhead hurdles - the immediate resistance lies at the declining 10EMA, followed by the 20EMA and 50EMA, each of which needs to be reclaimed convincingly.

Until these key moving averages are cleared and we see a meaningful expansion in 50EMA participation, the bias remains cautiously defensive. Investors should stay selective, focusing on high-quality names with strong valuation comfort while allowing the market to prove its intent through sustained follow-through.

In the first part of our valuation series, we explored why Growth and Return on Equity (RoE) are crucial for decoding valuation, along with the limitations of the PEG ratio. If you missed the first part, you can catch up in the below mentioned link.

This second part of our valuation series moves beyond the basics to introduce a more robust way of blending growth and RoE to spot attractively priced companies.

The Pro-Setups Approach: Beyond the PEG Ratio

At Pro-Setups, we address the limitations of PEG Ratio by adjusting traditional valuation multiples using both a company’s 3 years Average RoE and its weighted average sales growth.

We call these Adjusted Valuation Multiples. By dividing the traditional valuation multiples by a combination of a company’s average RoE and weighted sales growth, we create a more accurate picture of ‘fair value’.

In simple terms, the adjusted valuation multiples are:

The Rule of Thumb: The lower the adjusted ratio, the more reasonable the valuation is relative to the company’s peer group.

Why use Adjusted Multiples?

• These ratios combine Valuation (market sentiment) with Sales Growth (operational traction) and RoE (profitability efficiency).

• These ratios could help identify undervalued firms with strong sales momentum and efficient capital utilization.

• Integrates profitability (ROE) and growth (sales) to avoid overpaying for companies with high multiples but weak fundamentals.

• Averaging RoE smooths one-time distortions, while sales growth is harder to manipulate than earnings.

What High vs. Low Adjusted Valuation Ratios Reveal

A high adjusted valuation ratio indicate that the current valuation is not justifiable either because of:

• Unreasonable Market Sentiment: Elevated valuation multiples not supported by fundamentals or growth.

• Weak Profitability: Low RoE reduces earnings efficiency, making high valuation unsustainable.

• Slower growth rates fail to justify premium valuations, even in high-margin sectors.

A low adjusted valuation ratio indicates that the current valuation is attractive and justifiable because of:

• Rational or Undervalued Market Sentiment: Valuation multiples are well-supported or even surpassed by the company’s underlying fundamentals and growth trajectory.

• Strong Profitability: A high Average RoE enhances earnings efficiency, making the current valuation sustainable and potentially undervalued.

• Robust Growth: Strong sales growth rates fully justify current premiums and signal a company with significant market traction.

Case Study: Asset Management Companies (AMC)

Let’s go back to the case study illustrated in Part I of this valuation series. We noticed how UTIAMC at a P/E of 15.7x appeared to be the cheapest stock, but was actually a value trap. On the other hand, ICICIAMC at a P/E of 41.2x, looked expensive but deserved to get high premium from the market.

By dividing traditional valuation multiples by a combination of Average RoE and Growth, we get a clearer picture of which companies offer the best value for their performance. See the table below:

• ICICIAMC’s adjusted P/E to Avg RoE & Growth is only 2.3x, which is the lowest positive ratio among all its peers. It earns its premium by delivering superior performance, making it deserving candidate for a higher valuation tag.

• On the other hand, UTIAMC’s negative adjusted ratio signals that either the RoE or weighted avg. growth is in negative territory and hence it’s not as good as option to invest compared to its peers, until it starts showing positive performance.

• CRAMC: Offers the next best value after ICICIAMC.

• HDFCAMC and NAM-INDIA: Are solid but significantly more expensive relative to their performance than the leaders.

• ABSLAMC: Though its raw P/E multiple is lower than HDFC, its high adjusted ratio of 12.1x shows you are paying a much higher price for every unit of growth and efficiency you receive.

• Same interpretation can be drawn using other adjusted valuation multiples too.

A stock like ICICIAMC may carry a high premium, but its lower adjusted ratios relative to its peer group prove it is actually the more attractive investment. Ultimately, the goal is to find companies where you get the most growth and efficiency for every rupee invested.

Visualizing Value: The Bubble Chart

Wondering if this can be visualized for better clarity? Absolutely!

To make this data actionable, the Pro-Setups Dashboard uses bubble charts to plot performance:

• On the y-axis, we have the weighted average sales growth, where companies with higher growth appear at the top.

• On the x-axis, we plot the 3-year average Return on Equity, with companies having higher RoE positioned further to the right.

• The size of each bubble represents the valuation multiple (like P/E to average RoE & growth). A smaller bubble indicates a better, more attractive valuation.

Pro-Tip: The most attractively valued company will have the smallest bubble and be located in the extreme top-right corner of the chart.

In the chart above, ICICIAMC is positioned on the top-right of the chart and has smallest bubble compared to its peers. This suggests that it is actually cheapest in terms of valuation compared to others, when adjusted for growth and RoE.

CRAMC, NAM-INDIA, HDFCAMC and ABSLAMC are hanging out in the middle, but CRAMC has the smallest bubble size among these four, and hence offers higher value too. ABSLAMC, on the other hand, has biggest bubble size and hence it is expensive in adjusted terms.

UTIAMC growth rate is negative, and hence its bubble size is irrelevant and offers lowest value among the entire peer group.

The above bubble chart can be seen for other adjusted valuation multiples too and is available in the Peer Comparison page under Financial Insights in the Pro-Setups Dashboard.

Simplifying Discovery: Valuation Grading

Visualizing data is great, but filtering through hundreds of stocks or multiple sectors requires speed. We have simplified this into a Valuation Grade (A+ to E) based on how a stock stacks up against its sector peers.

• We benchmark every stock against its peers, assigning scores based on their specific adjusted valuation multiples.

• These marks are then distilled into a final grade ranging from A+ to E, where A+ represents the most attractive valuation and E signals the least.

  • A+: Exceptional Value

  • A: High Value

  • B+: Good Value

  • B: Fairly Priced

  • C: Expensive

  • D: Overpriced

  • E: Value Trap

Lets look at the valuation grades of the Asset Management Companies illustrated above.

The Efficiency Leaders (Grade A)

• ICICIAMC & CRAMC: Both companies secure an ‘A’ grade. These companies offer the most compelling value proposition because they provide the best performance relative to their growth rates and operational efficiency.

The Middle Ground (Grade B)

• HDFCAMC, NAM-INDIA & ABSLAMC: These industry mainstays fall into the ‘B’ grade category. While these are fundamentally solid companies, their adjusted ratios reveal they are more expensive for every unit of growth achieved when compared to the top-tier leaders.

The Underperformers (Grade D/E)

• UTIAMC: This stock is assigned a ‘D’ grade primarily due to its negative growth.

• It’s important to note the severity of these grades. Had the company reported negative Return on Equity (RoE), it would have dropped to an ‘E’ grade.

You can find these readymade filters on the Pro-Setups Dashboard to identify top-tier value with a single click.

Conclusion

In this valuation series, we have unpacked why traditional valuation metrics like P/E, P/Sales etc. or even PEG ratio fall short, revealing the power of blending average RoE with weighted sales growth for finding attractively valued companies. Adjusted Valuation Multiples - dividing traditional valuation ratios by growth and RoE - expose undervalued gems and value traps, as lower adjusted ratios signal better value relative to peers.

The Pro-Setups Dashboard simplifies valuation comparison by offering bubble charts for instant visual screening of how a company fares within its sector, as far as its growth, RoE and adjusted valuation multiples are concerned. By utilizing Valuation Grades (A+ to E) to benchmark stocks against their peers, investors can filter high-grade opportunities across hundreds of names with a single click.

Arm your trading with this framework via Pro-Setups - spot attractive opportunities efficiently and trade smarter in Indian markets.

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Key Indices Performance

Key Drivers for the Market

Overall sentiment remained weak, with the Middle East conflict and sharp moves in energy prices keeping risk appetite in check. Major global markets, including the US and other developed economies, also ended the week on a mixed to negative note.

• Geopolitical Escalation in West Asia: The main trigger for this volatility continues to be the ongoing tensions between the US, Iran, and Israel, which have now entered the fourth week, keeping uncertainty elevated.

• Crude Oil Price Shock: After falling to $92 per barrel, crude prices climbed back above $110 per barrel amid fears of supply disruption. For India, higher oil prices increase the import bill, push inflation higher, and put pressure on corporate margins leading to a negative impact on market sentiment.

• Rupee Volatility: The Indian Rupee fell to a new record low, slipping past ₹94.75 per US dollar.

• Corporate Earnings Season Kick-off: With the financial year coming to a close, focus now shifts to corporate earnings. Investors will closely track how companies performed in the last quarter of FY26 and how they factor in rising energy costs and currency weakness while giving guidance for FY27.

Technical Perspective

• Establishment of Lower Low (LL): Nifty500’s recent price action has established a fresh Lower Low (LL).

• Strong Resistance from 10EMA: The Nifty500 continues to show strong downward momentum, repeatedly facing resistance near the falling 10EMA..

The reason we track Nifty500 is because it represents over 90% of the free float market capitalization, making it a comprehensive barometer of market health.

Breadth Comparison & Inference

The market experienced a sharp erosion in its breadth, wiping out the temporary gains seen mid-week. While Wednesday showed a flash of hope with 43% of stocks trading above their 10EMA, that momentum has completely vanished, with only 19% remaining above that level by the end of the week. Compared to last Friday (20th March), when 26% of the stocks held above their short-term EMAs, current data confirms a significant deterioration in sentiment. This downward shift suggests that the mid-week recovery was a fleeting moment of selective participation rather than a sustainable shift in the broader market.

Strategic Interpretation:

• Structural Health: From a technical perspective, the index appears to be structurally weak. With a mere 13% of stocks trading above their 50EMA, the vast majority of the market is in a primary downtrend. This is a concerning drop from the 17% seen on Wednesday and sits even lower than last week’s 16% reading. When such a small fraction of the market holds its long-term trend, the underlying environment remains inherently fragile. The ‘Curtail’ signal on the 10/20 EMA crossover remains persistent, acting as a red flag for any aggressive positioning.

• Near Oversold, but not there yet: While the 30EMA and 50EMA metrics have both slipped into deep distress at 14% and 13% respectively, the 10EMA still sits slightly higher at 19%. Because all three metrics are not yet simultaneously below 15%, the market has not officially entered a potential oversold zone. This indicates that while the selling has been intense, we haven't quite reached the point of final exhaustion or capitulation.

• Execution Alpha: For the disciplined investor, the priority is to identify high-quality names with healthy valuation comfort (Valuation Grade A, A+, B and B+ in the Valuation Grade in the Pro-Setups Dashboard) that have maintained relative strength despite the broader index breakdown.

Accessing Market Breadth on Pro-Setups Dashboard is available for all readers. Click on the link below.

Market Breadth on Pro-Setups Dashboard

High returns and fast growth are the engines of valuation. To find a true winner, you have to look at how much a company earns on its capital (ROE) and how fast it is moving (Growth). Read Part I of our article on Valuation’s Dynamic Duo: Why RoE and Growth Rates Matter.

Summary

The combination of a fragile structure and the rapid evaporation of short-term momentum suggests that the index is struggling to find stable footing. Until we see a broad-based expansion in the number of stocks reclaiming their moving averages, the outlook remains defensive with a focus on risk mitigation. Investors should remain cautious; until we see a meaningful crossover of the 10/20EMA on Nifty500 and a surge in 50EMA participation, the bias remains titled to the downside.

The current outlook continues to favor capital preservation and defensive positioning until key resistance levels and moving average crossovers are reclaimed.

Would you rather own:

(i) Company A, that makes makes 25% return on equity, growing at 15% every year; or

(ii) Company B, that makes 10% return on equity, growing at same level as A?

Most rational business owners would prefer Company A, because higher returns on equity create more value over time.

Now take the idea one step further. Would you rather own:

(i) Company A, that makes 25% return on equity, growing at 15% every year; or

(ii) Company C, that makes same return on equity (25%) as Company A, but growing by 30% every year.

In that case, Company C which is the faster-growing business deserves the edge, and a better valuation multiple too.

That is the core message of this framework: Companies with higher Return on Equity and stronger growth rates usually deserve higher (not insane) valuation multiples.

Why ROE and Growth matter

Investors often use ratios such as P/Sales, P/E, P/B, EV/EBITDA, or even PEG to judge whether a stock is expensive or cheap. But these metrics, when viewed in isolation, can be misleading because they do not fully capture the quality of the business behind the valuation.​

• RoE tells us how efficiently a company uses shareholder capital to generate profits.

• Growth tells us whether the business is expanding its market opportunity and compounding that into larger earnings over time.

When both are strong, the market often rewards the company with a premium valuation and that can get super performance in stock returns for the investors.​

While quantitative metrics like ROE and Growth Rate gives a fair idea of the valuation of a specific stock, one also needs to consider a host of other qualitative metrics such as, but not limited to, company size, relative competitive positioning, management quality, Industry cycles stages etc., before identifying a stock as a potential investment candidate.

RoE and Valuation

Return on Equity is one of the clearest indicators of business quality. High RoE reflects efficient capital use, which is why such companies often command premium valuations. This is also why firms in the same industry trade at different P/E or P/B multiples. However, RoE alone isn’t enough - without sustained growth, even a high-RoE business may not justify a rich valuation.

Growth completes the picture

Growth is the second half of valuation. When returns on capital are similar, the faster-growing company typically deserves a higher multiple due to stronger future earnings potential. This is why growth businesses often appear expensive - investors are paying for what earnings can become, not just what they are today.

As Peter Lynch notes in One Up on Wall Street, the real opportunity lies in companies that combine strong profitability with sustainable growth.

Price/Earnings-to-Growth (PEG) Ratio

Before building a broader valuation framework, it is useful to understand one of the market’s most popular valuation tools: the PEG ratio. The PEG ratio, or Price/Earnings-to-Growth ratio, improves upon the traditional P/E multiple by bringing growth into the picture.​

PEG Ratio = P/E Ratio divided by expected earnings growth rate

The PEG ratio is particularly useful for comparing companies within the same industry but with different growth rates, allowing investors to assess relative value more effectively than with the P/E ratio alone. In general, a PEG below 1 may suggest undervaluation, while a PEG above 1 may suggest overvaluation.

However, PEG ratio misses the important element of Return on Equity. Two companies may have similar P/E multiples and similar growth rates, but if one generates much higher RoE, it is clearly the superior business. PEG would treat them similarly, even though their business quality is not the same.

A more practical framework is to adjust valuation multiples not only for growth, but also for RoE. In other words, instead of asking whether P/E is justified by growth alone, the better question is whether valuation is justified by both growth and quality of returns.

Refining the Inputs: Why We Use Sales Growth and Average RoE

To make this framework truly robust, we apply two critical adjustments:

• Prioritizing Sales Growth over Earnings:

  • The traditional PEG formula uses Expected Earnings Growth Rate. Future earnings growth projections are often speculative, analyst-dependent, or influenced by management’s overly optimistic guidance. Using actual historical sales growth provides a more objective, verifiable foundation. So we assign a higher weightage to the most recent quarter and lower to the previous quarter.

  • Further, Sales growth rate is often a more reliable metric than earnings growth rate for assessing a company’s market traction, scalability, and operational efficiency. Sales growth directly measures a company’s ability to increase revenue from its core operations, unlike earnings, which factor in expenses and accounting adjustments such as depreciation or one-time adjustments. A 20% sales growth rate signals rising customer adoption, even if earnings are temporarily depressed due to reinvestment.

• Averaging RoE for Stability:

  • Rather than looking at just the last year’s RoE, we use average RoE of the last few years. This captures a company’s ability to generate returns across different market conditions and operational cycles, smoothing out one-time distortions.

Case Study

Let’s explore the relationship between valuation multiples (P/E) and fundamental quality (ROE and Growth) across six major Asset Management Companies listed in India.

At first glance, UTIAMC appears to be the cheapest stock in the sector with a P/E of 15.7x, while ICICIAMC looks expensive at 41.2x. However, a quick look into the fundamentals reveals why the market has assigned these specific price tags.

a) The High-Performance Leader: ICICIAMC

ICICIAMC commands the highest valuation in the peer group for a clear reason: Capital Efficiency with Growth.

• Massive ROE: At 77%, its return on equity is nearly triple that of most peers.

• Resilient Growth: It maintains a robust sales growth of 23%.

• The Verdict: The market is willing to pay a premium (41.2x P/E) because the company generates world-class returns on every rupee of capital invested.

b) The Value Trap: UTIAMC

Conversely, UTIAMC’s low P/E is not a discount - it is a reflection of underperformance.

• Low Efficiency: A 16% ROE is the lowest in the group, suggesting it struggles to generate significant profit from its equity base, compared to its peers.

• Growth Struggles: With a growth of -22% and only 1% in last two quarters, it is lagging far behind the industry average.

• The Verdict: A low multiple of 15.7x is the market’s way of discounting a business with stagnant growth and low capital efficiency.

c) The Middle Ground: CRAMC, HDFCAMC, NAM-INDIA and ABSLAMC

The other four companies offer a somewhat balanced profile as far as their ROE profile is concerned. While their ROEs are relatively consistent (27%-34%), their paths diverge once growth is factored in.

• With its robust 25% growth in the latest quarter, CRAMC’s valuation becomes attractive at 22x PE multiple.

• HDFCAMC and NAM-INDIA offer steady, predictable performance with similar growth rates and valuation.

• However ABSLAMC’s low growth rates gets penalized to result into a lower P/E multiple (25.2x) because capital efficiency without meaningful growth is not acceptable to investors seeking premium returns.

Coming Next in Part 2: The Pro-Setups Advantage

High returns and fast growth are the engines of valuation. To find a true winner, you have to look at how much a company earns on its capital (ROE) and how fast it is moving (Growth).

In Part 2, we will show you how Pro-Setups does this hard work for you. We make it easy for our members to see which stocks are attractively priced and which ones are overpriced. Stay tuned to see how we turn all what you read today into actionable insights.

Key Indices Performance

Key Drivers for the Market

• Geopolitical Escalation in West Asia: The primary catalyst for the market volatility and under-performance continue to be the intensification of the conflict in West Asia, involving Iran, Israel, and the United States. The fear of a wider regional war disrupted sentiment, leading to a visible lack of buying conviction even during dips. Any signs of de-escalation or, conversely, new sanctions or military movements will be the #1 driver for global markets.

• Crude Oil Price Shock: Brent crude prices surged back above the $110/barrel mark due to fears of a supply crunch and the potential closure of the Strait of Hormuz. Higher oil prices directly hurt India’s import bill, a negative inflationary outlook, and eventual pressure on the corporate margins, amplifying the market’s downside reaction.

• Rupee Volatility: The Indian Rupee plummeted to a fresh record low, crossing over ₹93.5/USD.

Technical Perspective

• Establishment of Lower Low (LL): Nifty500’s recent price action has established a fresh Lower Low (LL).

• Support Zone Broken: The Nifty500’s earlier support zone around 22,400-22,500 has been breached.

• Death Cross: We made a death cross on Nifty500 last week. A death cross is a situation when 50EMA crosses under 200EMA, and it is considered negative in trading community. If history is to repeat again, then most market bottoms are formed within a couple of months of a death cross.

The reason we track Nifty500 is because it represents over 90% of the free float market capitalization, making it a comprehensive barometer of market health.

Breadth Comparison & Inference

The data suggests that while we have moved away from the capitulation lows seen last week - where all breadth metrics were sub-15% - the current bounce lacks broad-based participation. The minor uptick in short-term momentum is not yet reflected in the medium-term trend, indicating this may be a relief rally within a larger downtrend.

Strategic Interpretation:

• Structural Health: Currently, only 16% of stocks are trading above their 50EMA. Since this is significantly below the 50% threshold, the market lacks structural strength. The dominant trend remains bearish, with the ‘Curtail’ signal on the Nifty500 (10EMA < 20EMA) confirming that selling pressure persists at higher levels.

• Out of Oversold: Last week, the market was in a clear oversold zone as participation across the 10, 30, and 50EMAs fell below 15%. While we have technically moved out of that extreme oversold territory, the recovery remains shallow. The 30EMA participation sits at just 17%, confirming that the medium-term trend is still struggling to gain any real traction.

• Execution Alpha: For the disciplined investor, the priority is to identify high-quality names with healthy valuation comfort (Valuation Grade A, A+, B and B+ in the Valuation Grade in the Pro-Setups Dashboard) that have maintained relative strength despite the broader index breakdown.

Accessing Market Breadth on Pro-Setups Dashboard is available for all readers. Click on the link below.

Market Breadth on Pro-Setups Dashboard

Summary

With less than 17% of the universe maintaining their 50EMA, There is an absence of broad-based participation. Currently, the recovery is driven by narrow leadership that also lacks the follow through. Hence, we are observing a fragile technical structure that is attempting a bounce from oversold levels, but without a significant expansion of participation above the 50EMA, the path of least resistance to the upside remains under pressure. Investors should remain cautious; until we see a meaningful crossover of the 10/20EMA and a surge in 50EMA participation, the bias remains titled to the downside.

The current outlook favors capital preservation and defensive positioning until key resistance levels and moving average crossovers are reclaimed.

Key Indices Performance

The selling pressure was visible across most sectors and market-cap segments.

Key Drivers for the Market

• Geopolitical Escalation in West Asia: The primary catalyst for the market crash was the intensification of the conflict in West Asia, involving Iran, Israel, and the United States. This raised fears of a wider regional war, triggering a global risk-off move.

• Crude Oil Price Shock: Brent crude prices surged back above the $100/barrel mark due to fears of a supply crunch and the potential closure of the Strait of Hormuz. Higher oil prices directly hurt India’s import bill, inflation outlook, and corporate margins, amplifying the market’s downside reaction.

• Rupee Volatility: The Indian Rupee plummeted to a fresh record low, crossing over ₹92/USD. The sharp depreciation not only spooked foreign investors but also raised concerns over imported inflation and potential pressure on the current account deficit.

Technical Perspective

• Establishment of Lower Low (LL): Nifty500’s recent price action has established a fresh Lower Low (LL).

• Support Zone Broken: The Nifty500’s earlier support zone around 22,400-22,500 has been breached. The index briefly retested this level but failed to take control of it and slipped below it again.

• Death Cross: We made a death cross on Nifty500 on Friday. A death cross is a situation when 50EMA crosses under 200EMA, and it is considered negative in trading community. Probably, it’s time to check your wardrobe for the party that could be starting soon in a month or two.

  Here is what Investopedia says about a death cross.

  

  50EMA and 200EMA are not magic lines, but they’re important because traders worldwide take action based on them.

• Previous Death Crosses on Nifty500: If history is to repeat again, then there is a high probability that we will be making market bottom very soon. Have a look at some of the previous death crosses, and notice the days taken to make the bottom after the death cross.

  

The reason we track Nifty500 is because it represents over 90% of the free float market capitalization, making it a comprehensive barometer of market health.

Broader Market Capitulation & The Mean Reversion Signal

The Nifty 500 is now in a deeply Oversold zone, characterized by a significant deterioration in the market participation. With the 10/20EMA bearish crossover confirmed on February 27th, the short-term trend has shifted to a defensive posture. However, current breadth indicators - showing 88% of constituents trading below their respective 10, 30, and 50EMAs - suggest the market is probably nearing a point of seller exhaustion.

Strategic Interpretation:

• Structural Health: While the ‘Caution’ signal mandates capital preservation for momentum-based strategies, breadth readings below the 12% threshold historically coincide with oversold zone.

• The ‘Washout’ Phase: This lack of resilience represents a classic mean reversion setup. In professional terms, the ‘weak hands’ have mostly been flushed out, and the index is now trading at a technical extreme that typically precedes a relief rally.

• Execution Alpha: For the disciplined investor, the priority is to identifying high-quality names with healthy valuation comfort (Valuation Grade A, A+, B and B+ in the Valuation Grade in the Pro-Setups Dashboard) that have maintained relative strength despite the broader index breakdown.

Accessing Market Breadth on Pro-Setups Dashboard is available for all readers. Click on the link below.

Market Breadth on Pro-Setups Dashboard

Summary

There is an absolute absence of broad-based participation, and even the narrow leadership that held the index earlier in the month has vanished. While the deeply oversold breadth readings suggest the selling may be exhausted in the immediate term, investors should remain cautious until the index demonstrates a meaningful recovery in its structural base. The current outlook favors capital preservation and defensive positioning until key resistance levels and moving average crossovers are reclaimed.

On Monday, the Nifty500 broke below its 200EMA with a gap down and that gap is now likely to act as a strong resistance. Rapidly evolving geopolitics and the relentless selling by FIIs is keeping the Indian market on the edge.

Key Indices Performance

Every major market index recorded a decline of approximately 3% this week, highlighting a week of significant distress for the Indian equity markets. Every key index declined in varied degree thereby demonstrating a broad market wide secular bearish sentiment.

Key Drivers for the Market

Escalating West Asia Tensions: The primary catalyst for the market fall seems to be the rising conflict involving the U.S., Israel, and Iran and the real threat of this war expanding in the wider West Asian region. There are also concerns about possible disruption in the Strait of Hormuz, an important route for global oil supply, through which more than 20% of the global oil supply passes on a regular basis. This created a global ‘risk-off’ mood, where investors moved money out of stocks and into safer assets like gold. Brent crude prices also jumped above $90/barrel due to supply disruption fears. Rupee weakened to over ₹92/USD on crude surge.

The market’s near-term direction will depend mainly on whether the conflict escalates further or settles into a stalemate. Indian stock market will continue to face significant volatility. If the conflict deescalates quickly, recovery could be swift; otherwise, prolonged effects might push our market downward further.

Sectoral Performance Analysis in Pro-Setups Dashboard

The Sectoral Performance page in our Pro-Setups Dashboard now provides detailed analysis of sectors showing strength, gaining momentum, improving trends, fading leadership, and structurally broken sectors, helping you clearly identify sector rotation in the market. The analysis is updated everyday after market hours.

Technical Perspective

• Establishment of Lower Low (LL): Nifty500’s recent price action has established a fresh Lower Low (LL) near the budget day lows at around 22,280.

• Testing the 200EMA: Last week, Nifty500 closed the week at its 200EMA, which served as a vital structural floor. A break below accelerated selling toward the 22,400-22,500 levels, which was previous support zone.

• Immediate support & resistance zones: Immediate support for the Nifty500 is seen at the 22,400-22,500 zone. On the upside, 23,100, will act as a resistance, a zone where the price will be meeting the declining 50EMA and 200EMA.

• Bearish alignment: All shorter-term moving averages remain in a perfect bearish alignment (10EMA<20EMA<50EMA).

The reason we track Nifty500 is because it represents over 90% of the free float market capitalization, making it a comprehensive barometer of market health.

• Nifty500’s 10EMA crossed under its 20EMA on 27th February triggering a ‘Caution’ signal that suggests curtailing long positions.

• Participation collapsed this week, indicating that individual stocks are struggling to maintain the momentum seen earlier in the month.

• All three major breadth indicators are now below 20%, signifying deep correction. This indicates that roughly 80% of the stocks are now trading in a downtrend across all timeframes.

  • 10EMA: 17% of stocks are now trading above their 10EMA, compared to healthy 29% last week.

  • 30EMA: 18% of stocks are above their 30EMA, compared to 31% last week.

  • 50EMA: 19% of stocks are above their 50EMA, compared to 30% last week.

  • The structural stability (50EMA) has broken down, falling from 30% to 19%. This suggests that many of the stocks that were holding onto medium-term support last week have also given way.

  • Historically, breadth levels below 20% levels often precede a short-term relief bounce.

• Capital preservation is the priority until the 10EMA breadth can reclaim the 50% level and the 10/20 EMA triggers a fresh Crossover.

• It is important to note that overbought or oversold signals are most relevant for swing traders, as they reflect short-term momentum shifts.

• Accessing Market Breadth on Pro-Setups Dashboard is available for all readers. Click on the link below.

Market Breadth on Pro-Setups Dashboard

Summary

The market is in a technically weak zone, pressured by institutional selling and geopolitical tensions in West Asia. The Nifty500 established a fresh Lower Low. Technical indicators remain bearish, as market breadth has collapsed below 20% across all timeframes. While historically these oversold levels can precede a relief bounce, the current outlook favors capital preservation and defensive positioning until key resistance levels and moving average crossovers are reclaimed.

Key Indices Performance

Key Drivers for the Market

US-Iran War: The sudden escalation of the US-Iran conflict over the weekend has drastically altered the near-term landscape, shifting the focus entirely to a global risk-off scenario. It is no longer just a ‘possible trigger’, but is now going to be the primary driver of stock market for the coming week. Indian stock market could face significant volatility in the coming week. If the conflict deescalates quickly, recovery could be swift; otherwise, prolonged effects might push our market downward.

The term "global risk-off" describes a market regime where investors collectively move away from assets with high price volatility (stocks, commodities, emerging markets) and seek shelter in "safe havens" (gold, government bonds, stable currencies).

Technical Perspective

• Establishment of Lower Low (LL): Nifty500’s recent price action has established a fresh Lower Low (LL) near 23,136, confirming a short-term bearish trend.

• Testing the 200EMA: Nifty500 ended the week practically identical to its 200EMA, which serves as a vital structural floor. It is also a crucial demand zone as was identified in the previous newsletters too. A sustained hold here would signal a successful defense by long-term investors. Any further weakness would likely trigger accelerated selling toward the 22,400-22,500 levels.

• Bearish alignment: All shorter-term moving averages (10EMA<20EMA<50EMA), are now declining and positioned above the current price.

• Since the post-Budget recovery, the index has failed to form a new Higher High and is instead drifting back toward its recent swing lows.

• On weekly chart, Nifty 500 continues to trade within a long-term consolidation range. There is a clear loss of upward momentum but not a full breakdown of the primary long-term trend.

The reason we track Nifty500 is because it represents over 90% of the free float market capitalization, making it a comprehensive barometer of market health.

Read our post on Position Sizing

• Nifty500’s 10EMA crossed under its 20EMA on 27th February triggering a ‘Caution’ signal that suggests curtailing long positions.

• Participation has continued to drift lower this week, indicating that individual stocks are struggling to maintain the momentum seen earlier in the month.

• All three major breadth indicators are now below 1/3rd (33%) mark. This is well below the 50% ‘neutral’ mark, confirming that two-thirds of the Nifty500 stocks are currently trading below their short-to-medium-term trend lines.

  • 10EMA: 29% of stocks are now trading above their 10EMA, compared to healthy 33% last week.

  • 30EMA: 31% of stocks are above their 30EMA, compared to 37% last week.

  • 50EMA: 30% of stocks are above their 50EMA, compared to 33% last week.

  • With only 29-31% of stocks trading above their key EMAs, the market is lacking any broad-based support. The ‘Structural Stability’ (50EMA) remains stuck at 30%, indicating that 70% of the stocks are in a medium-term pressure.

• Capital preservation is the priority until the 10EMA breadth can reclaim the 50% level and the 10/20 EMA triggers a fresh Crossover.

• It is important to note that overbought or oversold signals are most relevant for swing traders, as they reflect short-term momentum shifts.

• Accessing Market Breadth on Pro-Setups Dashboard is available for all readers. Click on the link below.

Market Breadth on Pro-Setups Dashboard

Summary

The Indian stock market ended the week weak, with the Nifty500 declining 0.98% after a sharp Friday sell-off. Despite a positive start on Monday, the markets closed the week negative, as the initial “Tariff Relief” rally was completely erased. A sudden US-Iran conflict has shifted the market to a "global risk-off" regime, becoming the primary driver for the coming week. Technically, the Nifty500 established a lower low at 23,136, testing its crucial 200EMA. With only 29-31% of stocks above key moving averages, breadth indicators confirm a lack of broad support, making capital preservation the current priority.

Key Indices Performance

Large caps outperformed this week, with Nifty50 and Sensex gaining 0.39% and 0.23% respectively, while small caps slipped a modest 0.18%.

Key Drivers for the Market

• Trump Tariff Twist:

  • On February 20, 2026, the U.S. Supreme Court delivered a major blow to Trump’s trade agenda by striking down his sweeping global ‘reciprocal’ tariffs. The news came late after our markets closed the Friday session.

  • However, hours later, Trump signed a new executive order to impose a temporary 10% global tariff, which will be valid till 150 days, after which it requires Congress’ approval for extension.

  • Wall Street reacted positively. As far as India is concerned, uncertainty of tariff rates was removed to a large extent after reciprocal tariffs were brought down from 50% to 18%. Under the new 10% global tariff, India will face this rate for 150 days starting February 24. The market prefers a predictable small tax over an unpredictable huge tax. This will make the market optimistic for the weeks ahead.

  • Indian equities are likely to open higher on Monday in reaction to this update, though volatility is expected to continue. Any official notification on these new, lower rates will be the single largest driver for the Indian markets for a sustained run.

  • The 50% tariff on Indian goods was reduced to 18% following a trade deal announced on February 2, 2026. This policy change led to an immediate positive reaction in the Indian stock market. On February 3, 2026, the Nifty500 gapped up over 4.5%, however, only for half of those gains to vanish within days as the index failed to sustain higher levels till now. We do not want only a short-term spike because of this update.

    

• Geopolitical Tensions: Escalating friction between the US and Iran was the primary catalyst for the Thursday crash. Any further updates regarding the conflict will be important to track.

Technical Perspective

• Nifty500 had gained roughly 1.4% till Wednesday, until Thursday’s crash erased all such gains. Friday’s recovery brought some relief.

• Since the post-Budget recovery, the index has failed to form a new Higher High and is instead drifting back toward its recent swing lows.

• On weekly chart, Nifty 500 continues to trade within a long-term consolidation range. There is a clear loss of upward momentum but not a full breakdown of the primary long-term trend.

• 50EMA: The index must cross and sustain above 50EMA level to signal a true shift from a relief rally to a sustainable uptrend as the first sign of recovery.

• Critical Support Zone: The index took support from the 23,150-23,250 demand zone, as was identified in the previous week’s newsletter. Since this is a well respected zone, we adjust our drawing to reflect this zone.

• The February 1 post-Budget low (around 22,300-22,400 levels) - a breach here would be technically catastrophic.

• Nifty500’s 10EMA, 20EMA and 50EMA are currently converging indicating loss of immediate directional momentum.

The reason we track Nifty500 is because it represents over 90% of the free float market capitalization, making it a comprehensive barometer of market health.

• Nifty500’s 10EMA crossed above its 20EMA on 9th February triggering a ‘Stay’ signal that suggests maintaining long positions.

• The market is currently experiencing a period of sideways consolidation with a cautious undertone.

• Participation has continued to drift lower this week, indicating that individual stocks are struggling to maintain the momentum seen earlier in the month.

• All three major breadth indicators are now clustered in the 33-37% range. This is well below the 50% ‘neutral’ mark, confirming that two-thirds of the Nifty500 stocks are currently trading below their short-to-medium-term trend lines.

  • 10EMA: 33% of stocks are now trading above their 10EMA, compared to healthy 40% last week.

  • 30EMA: 37% of stocks are above their 30EMA, compared to 42% last week.

  • 50EMA: 33% of stocks are above their 50EMA, compared to 35% last week. The 50EMA breadth has stalled around the same level, failing to cross the critical 50% midpoint, which means that the broader market is still structurally weak.

• It is important to note that overbought or oversold signals are most relevant for swing traders, as they reflect short-term momentum shifts.

• Accessing Market Breadth on Pro-Setups Dashboard is available for all readers. Click on the link below.

Market Breadth on Pro-Setups Dashboard

Summary

Broader market breadth remained structurally weak with only 33-37% stocks trading above their key moving averages. However, sentiment is expected to shift following a late Friday U.S. Supreme Court ruling that struck down reciprocal tariffs. Although Nifty500 remains in a long-term consolidation range and closed just below its 50EMA, it is expected to have a positive reaction coming week. The primary concern for us is that these expected gains do not evaporate quickly, as seen previously. Although the significant reduction in tariffs is a welcome, trend-changing development, the market is now seeking a sustained run rather than a short-term spike.

Key Indices Performance

While selling pressure was concentrated in heavyweights and blue-chip stocks, mid & small cap segments showed some resilience.

Key Drivers for the Market

• Sharp sell-off in IT stocks: Nifty IT index tumbled over 8% during the week, with large names like TCS, Infosys and Wipro hitting fresh 52week lows amid concerns on AI-led disruption to traditional service lines. As the AI disruption narrative remains a hot topic, Indian IT services companies will remain sensitive to global peers’ commentary.

• Corporate Earnings Tail-end: As the Q3 FY26 earnings season concludes this coming week, the focus will shift to management commentaries on how the US trade deal will impact their bottom lines in the coming quarters.

Technical Perspective

• Nifty500 dropped 1.43% on Friday alone, reflecting a broader market sell-off that has significantly weakened its short-term structure.

• After a brief post-Budget recovery, the index failed to form a new Higher High and is instead drifting back toward its recent swing lows.

• On weekly charts, Nifty 500 continues to trade within a long-term consolidation range.

• 50EMA: The index must cross and sustain above 50EMA level to signal a true shift from a relief rally to a sustainable uptrend as the first sign of recovery. On the contrary, it closed below 50EMA this week.

• Critical Support Zone: The index is currently resting near the 23,150-23,250 demand zone (previous week’s swing low), which has repeatedly acted as support zone previously.

• The February 1 post-Budget low (around 22,300-22,400 levels) - a breach here would be technically catastrophic.

• Bullish Momentum weakened again: Nifty 500’s 10EMA briefly crossed back above the 20EMA, initially suggesting a spark of recovery. However, this momentum proved short-lived following Friday’s sharp rejection.

• Bearish Alignment: Although the 10EMA technically moved above the 20EMA during the week, it has already curled downwards. 20EMA remains below downward sloping 50EMA.

The reason we track Nifty500 is because it represents over 90% of the free float market capitalization, making it a comprehensive barometer of market health.

• Nifty500’s 10EMA crossed above its 20EMA on 9th February triggering a ‘Stay’ signal that suggests maintaining long positions.

• While the primary trend signal has turned bullish, the underlying participation has started to fracture following a surge early in the week. A further fall earlier next week and the ‘Stay’ signal will likely fail and turn into a ‘Crossunder‘.

• Despite the ‘Stay’ signal, breadth indicators experienced a sharp contraction towards the end of the week, reversing much of the progress made earlier.

  • 10EMA: 40% of stocks are now trading above their 10EMA, compared to healthy 60% last week.

  • 30EMA: 42% of stocks are above their 30EMA, same as last week.

  • 50EMA: 35% of stocks are above their 50EMA, compared to 33% last week. The 50EMA breadth has stalled around the same level 35%, failing to cross the critical 50% midpoint, which means that the broader market is still structurally weak.

• It is important to note that overbought or oversold signals are most relevant for swing traders, as they reflect short-term momentum shifts.

• Accessing Market Breadth on Pro-Setups Dashboard is available for all readers. Click on the link below.

Market Breadth on Pro-Setups Dashboard

Summary

Although the week started with a positive bias, sentiment was crushed by global concerns regarding AI-led disruptions, triggering a brutal sell-off in IT stocks. Heavyweights such as TCS, Infosys, and Wipro hit fresh 52-week lows. Consequently, the Nifty500 significantly weakened its short-term structure after failing to sustain above its 50EMA. While the Nifty 500’s 10EMA technically crossed above its 20EMA on February 9, a bearish alignment persists as the 20EMA remains below a downward-sloping 50EMA. A true, sustainable recovery will only be confirmed once the index decisively reclaims and sustains above the 50EMA, achieving a bullish alignment where the 10EMA>20EMA>50EMA. Until then, the market is likely to remain in a choppy, news-driven consolidation phase.

Key Indices Performance

It was a week of broad-based recovery across the Indian markets, driven by the India-US trade deal.

Key Drivers for the Market

• Budget 2026 STT Shock: The Union Budget 2026, presented on February 1, 2026, triggered a sharp market sell-off due to hike in STT, with key benchmark indices (Sensex and Nifty50)) both plunging over 2% during the Sunday trading session.

• India-US Trade Breakthrough: However, the primary catalyst for the week’s recovery was the announcement that the US would reduce tariffs on Indian goods from 50% to 18%. This announcement provided one of the strongest single-day rally in years on 3rd Feb.

• RBI Monetary Policy: The RBI kept the repo rate unchanged at 5.25% on Friday. While the status quo was expected, the upward revision of the FY26 GDP growth forecast to 7.4% (from 7.3%) reassured investors of the strength in Indian economy.

• Corporate Earnings Tail-end: As the Q3 FY26 earnings season concludes this coming week, the focus will shift to management commentaries on how the the US trade deal will impact their bottom lines in the coming quarters.

• AI Fears Trigger Global Tech Sell-off: Global and Indian IT stocks plunged this week as Anthropic’s new AI tools sparked fears of massive disruption to traditional enterprise software business models.

Technical Perspective

• Nifty500 staged a significant tactical recovery after the extreme volatility triggered by the Union Budget on February 1. After the plunge established a new Lower Low (LL) on the budget day, the index found strong buying interest after the US-India trade deal announcement.

• The index has transitioned from a sharp structural breakdown back into a repair phase, now trading near its 50EMA.

• 50EMA: The index must cross and sustain above 50EMA level to signal a true shift from a relief rally to a sustainable uptrend as the first sign of recovery.

• Bullish Momentum Re-emerging: Both the 10EMA and 20EMA have started to curl upwards, reflecting the recovery seen over the last few sessions.

• Bearish Alignment: Despite the upward turn of 10EMA & 20EMA, Nifty500 maintains a bearish alignment: 10EMA<20EMA<50EMA. The overall EMA structure suggests that the market is still in a "Sell on Rallies" regime until the 10EMA & 20EMA can decisively cross back above the 50EMA.

The reason we track Nifty500 is because it represents over 90% of the free float market capitalization, making it a comprehensive barometer of market health.

• Nifty500’s 10EMA crossed under its 20EMA on 12th January triggering a ‘Curtailing’ signal that suggests reduction or closure of existing long positions.

• The market witnessed a ‘V-shaped’ recovery in short-term participation from the oversold lows of late January, though structural repair at the medium-term level is moving slower.

• All moving average breadth indicators shows improvement compared to the start of the week:

  • 10EMA: Reclaiming 60% for the 10EMA is a positive milestone, indicating that more than half of the universe that we track are back in a short-term uptrend.

  • 30EMA: 42% of stocks are above their 30EMA, compared to 25% last week.

  • 50EMA: 33% of stocks are above their 50EMA, compared to 20% last week. While the recovery is broad, two-thirds of the market is still battling structural weakness. While momentum has improved, the medium-term structural trend is not yet fully bullish. A reading above 50% here is generally needed for a confirmed healthy market.

• It is important to note that overbought or oversold signals are most relevant for swing traders, as they reflect short-term momentum shifts.

• Accessing Market Breadth on Pro-Setups Dashboard is available for all readers. Click on the link below.

Market Breadth on Pro-Setups Dashboard

Summary

The Indian market has shifted from a downward bias into a period of high-volatility transition, where it is difficult to confidently label the current environment as ‘Sell on Rallies’ or ‘Buy on Dips’. While the market staged a strong recovery this week, the price action remains erratic. A true, sustainable ‘Buy’ environment will only be confirmed once the technical setup stabilizes and the EMAs achieve a bullish alignment, with the 10EMA>20EMA>50EMA on the Nifty500 chart. Until then, the market is likely to remain in a choppy, news-driven consolidation phase.