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.

Key Indices Performance:

Key Drivers for the Market

• FII Selling & Rupee Weakness: FIIs remained aggressive net sellers throughout January. This pressure was compounded by the Indian Rupee hitting a record low of near ₹92 per dollar, pressured by global ‘risk-off’ sentiment among international investors.

• Pre-Budget Nervousness: With the Union Budget scheduled for Sunday, February 1, there was some profit-taking as traders cut leverage and reduced risk heading into the event. Markets will react to announcements regarding capital gains tax, infrastructure spending, Defence, green energy, and AI sectors.

• Geopolitical and Trade Tensions: Rising global uncertainties, including US trade tariff threats continue to remain the a major event risk going further.

• Q3 Earnings Season: The Q3 of FY26 earnings season is in full swing. The final leg of the earnings season will continue to drive stock-specific movements.

Valuation Matters

This week, we introduced ‘Valuation Grade’ filter in our Pro-Setups Dashboard. While technical analysis focuses on price and charts, adding valuation during a market correction becomes important even for swing and positional traders. When markets fall sharply, prices drop faster than businesses weaken. Reasonably valued stocks attract long-term investors which later fuels strong trends.

Without valuation as a filter, it becomes difficult to decide which breakouts deserve capital. Stocks with attractive valuation, good ROE and growth have a much higher probability of converting a bounce into a sustainable uptrend.

Each stock is graded from A+ to E, where A+ represents the most attractive valuation and E the least attractive.

The grades are not based only on low valuation multiples. They also take into account the quality (ROE) and growth of a company and compares it with other stocks in the same sector.

So while this filter is not a buy signal, it highlights stocks that are relatively attractive on valuation. That said, valuation is not an exact science. It is more of an art. Our assessment can be wrong. But the grading system helps us focus our attention on better candidates.

Technical Perspective

• Nifty500 concluded a highly volatile month, characterized by a failed bullish breakout followed by a sharp structural breakdown.

• Channel Breach: The index has decisively breached the lower support boundary (approx. 23,400) of the recent consolidation zone, that had acted as a support floor since December.

• Lower Low (LL) Formation: After hitting a fresh 52-week high of 24,144 early in the month, the index failed to sustain those levels, subsequently plunging to form a series of Lower Highs and a Lower Low near 22,562.

• 50EMA: The 50EMA is now in declining state and has thus turned red, acting as a stiff overhead resistance level. The price is now trading significantly below 50EMA, signaling a loss of short-to-medium-term 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 under its 20EMA on 12th January triggering a ‘Curtailing’ signal that suggests reduction or closure of existing long positions.

• The market breadth shows signs of a technical recovery from extreme oversold levels, though the structural trend remains in a defensive state. While momentum has improved, the short-to-medium-term structural trend is not yet fully bullish.

• There has been a significant bounce in short-term participation, but medium-term levels continue to lag behind the healthy 50% threshold:

  • 10-Day EMA: 46% of stocks are now trading above their 10EMA, compared to 11% last week. The jump from 11% to 46% in stocks above the 10EMA confirms the “oversold bounce” anticipated last week.

  • 30-Day EMA: 25% of stocks are above their 30EMA, compared to 10% last week.

  • 50-Day EMA: 20% of stocks are above their 50EMA, compared to 11% last week. The 50EMA reading is at just 20%, meaning 80% of the stocks are still in a medium-term downtrend despite the recent bounce.

• The market has staged a strong relief rally after the extreme selling of the previous week. However, with the "Curtail" signal still active and the 50EMA breadth at just 20%, this move is currently a counter-trend bounce rather than a new uptrend.

• 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 has shifted into a "Sell on Rallies" mode, driven by heavy FII selling and global trade uncertainties, where any minor recovery is expected to be met with selling pressure. While domestic institutional investors continue to provide support, a decisive turnaround is dependent on the upcoming Union Budget 2026 and the remainder of the Q3 FY26 earnings season. Previous support levels now act as resistance. The technical setup suggests that the market will likely remain volatile and under pressure heading into the Union Budget 2026. Until these clear the air, the technical indicators point toward a volatile, "wait-and-watch" environment with a downward bias.

Key Indices Performance:

It was a rough week for the broader market, particularly for small and midcaps. Markets briefly rebounded on positive trade sentiment following President Trump's remarks at Davos; however, these gains failed to hold. The Nifty500 ultimately closed the week down 3.3%.

Key Drivers for the Market

• Aggressive FII Outflows: Foreign Institutional Investors remained heavy net sellers this week.

• Rupee at Record Lows: The Indian Rupee plummeted to a historic low near ₹91.965 per USD, pressured by global ‘risk-off’ sentiment among international investors.

• Geopolitical and Trade Tensions: Renewed concerns regarding US-Europe trade relations and potential tariff threats under the Trump administration kept global markets on edge. Trump’s comments on a ‘great’ trade deal between the US and India supported buying interest, but it could not lift the sentiments later in the week.

• Q3 Earnings Season: The Q3 of FY26 earnings season is in full swing. The initial set of corporate earnings did little to support markets this week.

Technical Perspective

• Nifty 500 has undergone a decisive structural breakdown, invalidating previous consolidation zones and entering a confirmed bearish phase.

• Channel Breakdown: The index has decisively breached the lower support boundary (approx. 23,400) of the recent consolidation zone. This breakdown was marked by a sharp ‘V-shaped’ decline that erased weeks of gains in a matter of days.

• 50EMA): The 50EMA is now in declining state and has thus turned red, acting as a stiff overhead resistance level. The price is now trading significantly below 50EMA, signaling a loss of short-to-medium-term momentum.

• Establishment of Lower Low (LL): The recent price action has established a clear Lower Low (LL), confirming that the market has transitioned from a sideways range into a downtrend.

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.

• Market breadth has deteriorated significantly. There has been a significant breakdown in market participation over the last week.

  • 10-Day EMA: 11% of stocks are now trading above their 10EMA, compared to 23% last week.

  • 30-Day EMA: 10% of stocks are above their 30EMA, compared to 22% last week.

  • 50-Day EMA: 11% of stocks are above their 50EMA, compared to 22% last week.

• Extreme Bearishness: With only 10-11% of stocks trading above their key moving averages, the market is currently in a state of extreme weakness.

• Oversold: Historically, low market breadth readings are often associated with ‘Oversold’ conditions, creating potential for an oversold bounce. However, being ‘Oversold’ is not a ‘Buy’ signal. Market can remain oversold for days or even weeks if a strong downtrend or negative fundamental story is in place. Any immediate bounce may be short-lived. Buying solely because breadth is low without waiting for confirmation can lead to losses if the market continues to decline.

• 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 remains in a weak structural state. The ‘Buy on Dips’ environment has been completely replaced by a ‘Sell on Rallies’. The breakdown is fueled by aggressive FII selling and escalating India-US trade tensions and global uncertainties. The technical setup suggests that the market will likely remain volatile and under pressure heading into the Union Budget 2026. With breadth readings hovering near 10%, the market is in ‘oversold’ territory, looking for a short bounce.

Key Indices Performance:

While IT bellwethers provided a late-week boost due to upgraded revenue guidance, the broader market remained under pressure. Overall, indices remained largely flat this week.

Key Drivers for the Market

• Q3 Earnings Momentum: The week was dominated by the kickoff of the third-quarter corporate earnings season. Major IT players and early reporters from the banking sector posted numbers that largely met or slightly exceeded street expectations. Major IT players raised their revenue guidance for the remainder of FY26. This offset the broader market sluggishness and provided the necessary weight to keep the indices in the green.

• Trade and Geopolitical Cues: Ongoing uncertainty regarding potential U.S. tariffs and the pending U.S.-India trade deal kept investors from taking aggressive long positions. Any formal announcement or clarity on the India-U.S. trade negotiations could act as a significant catalyst for our market.

• Pre-Budget 2026 Positioning: With the Union Budget usually presented on February 1, January is the peak month for ‘Budget trades’.

Technical Perspective

• Nifty500 failed to sustain its recent breakout and entered a significant corrective phase. The failed breakout followed by a deep ‘V-shaped’ decline has altered the short-term market structure. The index is back into the consolidation phase now.

• The most recent price action has established a clear Lower Low (LL), signaling a shift from a ‘buy on dips’ environment.

• Weekly Perspective: The weekly chart shows that the broader bullish trend is being severely tested. This week’s candle shows a significant bearish engulfing-style movement that has erased last few weeks of gains. The index is currently resting near the Lower Low (LL) support zone established in December.

• 50EMA: The index could not sustain above its rising 50EMA this week and fell back in the consolidation range. Reclaiming and sustaining levels above the 50EMA is crucial to neutralize recent bearish momentum and restore investor sentiment.

• Failed Recovery Attempts: Small intraday bounces have been consistently sold into, failing to reclaim previous support levels or the 50EMA.

• On the downside, support is seen near 23,200-23,000. A decisive break below this zone could open room for a deeper correction.

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.

• While there was a slight bounce in the shortest-term indicator from last week's lows, overall breadth remains significantly below the healthy 50% threshold.

  • 10-Day EMA: 23% of stocks are now trading above their 10EMA, a substantial fall from 14% last week.

  • 30-Day EMA: 22% of stocks are above their 30EMA, compared to 21% last week.

  • 50-Day EMA: 22% of stocks are above their 50EMA, compared to 22% last week.

• Medium-term weakness: Despite a minor recovery in stocks above the 10EMA, the medium-term health (30EMA and 50EMA) is stagnant at 22%. This confirms that roughly 78% of the market is still trading in a medium-term downtrend.

• 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 remains in a weak structural state. Although the aggressive selling pressure seen at the end of last week has slowed, the anticipated 10/20 EMA crossunder occurred early in the week, confirming the shift in short-term momentum from a “buy on dips” to a “cautionary” environment. Investors are now shifting focus toward the upcoming Union Budget and ongoing Q3 earnings for any signs of a potential revival, though current technical setups demand extreme defensive positioning. With only 22% of stocks trading above their moving averages, the current environment suggests extreme caution and capital preservation.

The “Wall” on which our dear Humpty Dumpty was sitting represented a strong resistance zone (around the 24,000-24,100 level for Nifty500) that the market had tested multiple times. By the end of last week and the very start of the New Year, the index finally pushed above this resistance.

This week, the market experienced a “Great Fall,” losing over ₹15 lakh crore in investor wealth. The index didn’t just slide; it crashed significantly lower. The last week’s breakout proved to be a ‘Bull Trap’.

Key Indices Performance:

The Nifty50 and Sensex each fell roughly 2.5% for the week ending January 9, 2026, but the real ‘scramble’ occurred in the more volatile segments; the Nifty SmallCap 250 took the hardest hit, plunging -3.49%.

Key Drivers for the Market

• Worst week in months: Aggregate market capitalization eroded by roughly ₹15 lakh crore, marking the steepest weekly wealth destruction since around September 2025. Last week euphoria turned into profit booking this week.

• The “Trump Tariff” Shock: US President Donald Trump sharply escalated his tariff stance against India by backing the ‘Sanctioning Russia Act of 2025’. The Act authorizes punitive duties of up to 500% on all goods and services imported from countries that continue to buy Russian oil, with India explicitly named among the targets.

• FII Selling: Foreign Institutional Investors continued their aggressive selling streak.

• Ongoing Earnings season: The results season has now started, and more quarterly numbers will keep coming over the next few weeks. Corporate India’s performance will be the ultimate test for the market mood going forward.

• Pre-Budget 2026 Positioning: With the Union Budget usually presented on February 1, January is the peak month for ‘Budget trades’.

Technical Perspective

• Nifty500 failed to sustain its recent breakout and entered a significant corrective phase. The failed breakout followed by a deep ‘V-shaped’ decline has altered the short-term market structure. The index is back into the consolidation phase now.

• The most recent price action has established a clear Lower Low (LL), signaling a shift from a ‘buy on dips’ environment.

• Weekly Perspective: The weekly chart shows that the broader bullish trend is being severely tested. This week’s candle shows a significant bearish engulfing-style movement that has erased last few weeks of gains. The index is currently resting near the Lower Low (LL) support zone established in December.

• 50EMA: The index could not sustain above its rising 50EMA this week and fell back in the consolidation range. Reclaiming and sustaining levels above the 50EMA is crucial to neutralize recent bearish momentum and restore investor sentiment.

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 over its 20EMA on 23rd December triggering a ‘Stay’ signal that suggests holding onto existing long positions. This edge is now very slim, and even a sideways move from here could cause the 10EMA to cross under 20EMA next week.

• The significant gains in breadth seen last week have been largely erased, with all indicators crashing well below the 50% midpoint.

  • 10-Day EMA: 14% of stocks are now trading above their 10EMA, a substantial fall from 70% last week.

  • 30-Day EMA: 21% of stocks are above their 30EMA, compared to 50% last week.

  • 50-Day EMA: 22% of stocks are above their 50EMA, compared to 40% last week.

• Short-term collapse: The percentage of stocks above their 10EMA plummeted from 70% to 14%, indicating a violent short-term sell-off across the broader market.

• Medium-term weakness: Readings for the 30EMA (21%) and 50EMA (22%) show that structural support has failed to hold, with roughly 80% of the market now trading in a downward medium-term trend.

• 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

This week, the Nifty 500 faced a sharp reversal, failing to sustain its recent breakout and transitioning from a recovery back into a corrective phase in a single week. This week’s fall was triggered by global headwinds, including FII outflows and escalating India-US trade tensions regarding potential tariffs. Consequently, market breadth has also deteriorated. The market has transitioned from a bullish breakout attempt to a test of its medium-term support levels. While the 10/20 EMA crossover signal has not yet flipped to ‘Crossunder’ (which will happen most likely in the coming week), the market breadth is extremely poor. With only 14-22% of stocks trading above their moving averages, the current environment suggests extreme caution and capital preservation.

Key Indices Performance:

It was a strong week for the broader and midcap universe, with Nifty500, Nifty MidCap150 and Nifty MidSmallCap400 all outperforming the frontline Nifty50 and Sensex. This points to a constructive participation widening beyond largecaps. Nifty SmallCap250 at 1.09% still did well but lagged the midcaps, suggesting investors are currently favoring relatively higher‑quality midcaps over the more volatile smallcaps.

Key Drivers for the Market

• Optimism around upcoming earnings: Corporate profitability is the single most critical factor as we move in to 2026. Markets are entering the Q3 FY26 earnings season next week with a clear sense of optimism, as investors look for confirmation of strong domestic demand, healthy credit growth and margin stability. Corporate India’s performance will be the ultimate test for the market mood going forward.

• Pre-Budget 2026 Positioning: With the Union Budget usually presented on February 1, January is the peak month for ‘Budget trades’.

• Global Trade Policy: Delays or negative developments regarding India-US trade deal, remain the primary external headwinds.

Technical Perspective

• Nifty 500 Bullish Breakout: Nifty500 has made a significant structural breakthrough, shifting from a sideways consolidation phase to a fresh bullish breakout of the horizontal channel.

• New 52W High: The latest candle is a strong bullish breakout that has set a new 52-week high, surpassing the previous resistance near 24,035. The pattern of Higher Lows (HL) and Higher Highs (HH) has resumed.

• Weekly Perspective: The weekly chart reinforces this strength, showing a clear HH formation that confirms the primary bullish trend remains intact and is gaining fresh acceleration.

• 50EMA: The index is now trading comfortably above the 50EMA, which is beginning to slope upward again, signaling renewed short-to-medium-term strength. Staying above 50EMA keeps the “Buy on Dips” sentiment alive.

• Momentum Signal: The 10EMA over 20EMA ‘Stay’ signal triggered on December 23 stays intact. Nifty500 maintained its footing and successfully challenged the previous overhead supply.

• Key Risks: Failure to sustain above the 24,000 level could lead to a retest of the Rising 50EMA dynamic support. This will lead to a fallback in the consolidation range.

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 over its 20EMA on 23rd December triggering a ‘Stay’ signal that suggests holding onto existing long positions.

• There has been a sharp surge in the number of stocks participating in the current uptrend.

  • 10-Day EMA: 70% of stocks are now trading above their 10EMA, a substantial jump from 47% in late December.

  • 30-Day EMA: 50% of stocks are above their 30EMA, finally hitting the critical midpoint.

  • 50-Day EMA: 40% of stocks are above their 50EMA (up from 31% last week).

  • While the short-term trend is now robust, the medium-term structural stability (50EMA) is still recovering but is no longer "weak," showing a clear upward trajectory.

• With the majority of stocks (70%) now above their short-term averages and nearly half above their medium-term averages, the market breadth has shifted from defensive to offensive. The 50EMA breadth is currently at 40%. A move above 50% would confirm a structural recovery for the broader market. Until then, the broader market cannot be said to have fully transitioned back into a confirmed uptrend.

• 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 Nifty 500 has ended its period of uncertainty by breaking out of its consolidation range. This move, characterized by a fresh 52-week high, suggests that the ‘Buy on Dips’ sentiment is firmly back in control. For the first time in several weeks, short-term breadth (10EMA) is back in healthy territory (>60%), and the medium-term breadth (30EMA) has touched the 50% midpoint. However, the 50EMA reading remains below 50%, indicating that the broader market has not yet fully transitioned back into a confirmed uptrend. Investors should now watch for the index to sustain levels above 24,000 to confirm that this is not a ‘fake-breakout’, though the broad-based participation and Higher High formation make a continuation of the bull run the more likely scenario.

Key Indices Performance:

Nifty500 outperformed the frontline indices this week, gaining 0.43% versus 0.29% on Nifty50 and 0.13% on Sensex. Nifty SmallCap250 led the market with a strong 1.26% advance, followed by Nifty MidSmallCap400 and Nifty MidCap150, underscoring relatively stronger momentum in the broader and small-cap space.

Key Drivers This Week

There were no major domestic triggers like policy announcements. With global markets also in holiday mode, external cues were muted, keeping institutional flows also subdued.

Technical Perspective

• Nifty 500 trend: Despite the daily consolidation, the primary weekly trend remains bullish.

• Consolidation/Sideways Phase: The price action on daily timeframe is consolidating in a horizontal channel (defined by the two grey rectangular zones).

  

  • Resistance: The upper zone acts as a supply area where Nifty500 has struggled to break out, forming multiple “HH” peaks that failed to initiate a fresh rally.

  • Support: The lower zone is a demand area. Note the Lower Low (LL) followed by a Higher Low (HL); this indicates that while the trend was threatened, buyers stepped in at the base of the channel to prevent a breakdown.

  • The latest high is tagged as HH but is only marginally above the prior peaks and still inside the broader resistance band, so it does not yet confirm a strong breakout.

• The price is hovering right around 50EMA, indicating a battle between bulls and bears for short-term control. In previous two weeks, price broke below its 50EMA, but managed to close above it as the week ended. Staying above 50EMA keeps the “Buy on Dips” sentiment alive.

• The medium-term trend is currently in a consolidation phase. After reaching a 52-week high near 24,035, Nifty500 has faced some resistance and is moving in a range. For Nifty500, breaking and sustaining above the 24,035-24,100 is crucial for the next leg of the bull run.

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 over its 20EMA on 23rd December triggering a ‘Stay’ signal that suggests holding onto existing long positions.

• As of December 19, 2025, about 47%, 35% and 31% of stocks are above their 10EMA, 30EMA, and 50EMA respectively. Last week, these readings were 41%, 27% and 25%, indicating improvement in market breadth this week.

• The short-term and medium-term structural stability across the board remains weak, with only 30-35% of stocks still trading above their 30EMA and 50EMA, well below 50% mark.

• The market breadth readings remain below the midpoint (50% mark), signaling that the majority of stocks are trading below short-to-medium-term trend levels, which is typically a corrective sign for the broader market.

• It’s 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 broader market maintains its sideways consolidation phase, with the Nifty 500 index ending the week with a marginal gain of 0.43% to close near 23,780. Market breadth has shown improvement this week; approximately 31% to 35% of stocks are now trading above their 30EMA and 50EMA, up from just 25% in the previous week. Technically, a crossover of Nifty500’s 10EMA over its 20EMA on December 23 has triggered a 'Stay' signal, encouraging us to hold existing long positions as the index continues to battle for control around its 50EMA. Looking ahead, a decisive break and sustain above the 24,035-24,100 resistance zone remains crucial to confirming the next leg of the bull run.

Key Indices Performance:

Key Drivers This Week

• Currency watch: The Indian Rupee came under pressure and hit record lows mid-week. Supportive steps from the RBI and a softer US Dollar helped the rupee recover slightly.

• Global signals: US inflation data came in lower than expected. This raised hopes of rate cuts by the Federal Reserve in early 2026 and led to a broad rally in global markets.

• FII flows stabilizing: FIIs were strong sellers in the first half of the week, continuing the trend seen since early December. Toward the end of the week, they turned marginal buyers. DIIs stayed steady buyers.

• BoJ rate hike impact: A rate hike by the Bank of Japan makes yen borrowing more expensive and reduces the appeal of ‘carry trades’. This can cause short-term FII outflows, higher volatility, and some pressure on Indian stocks. Over the medium term, the impact is expected to be limited, as Japanese rates (0.75% after the hike) are still low and strong domestic growth and local flows provide support.

Technical Perspective

• Nifty 500 trend: The daily timeframe chart shows Nifty500 in a short‑term corrective phase within a still‑intact longer‑term uptrend, with price oscillating around the 20EMA and 50EMA. It is forming lower highs and mixed higher‑low/ lower‑low structures that point to consolidation rather than a confirmed top. The recent ‘lower high - lower low’ seen on the daily chart appears as a minor correction on the weekly timeframe rather than a total trend breakdown.

• The price is hovering right around 50EMA, indicating a battle between bulls and bears for short-term control. Just like previous week, it broke below its short-term key moving averages (20EMA and 50EMA), but managed to close above them as the week ended.

• Recent momentum: There has been a recent pullback followed by a recovery attempt. This suggests that buyers are stepping in near short-term support zones (see image below).

• The medium-term trend is currently in a consolidation phase. After reaching a 52-week high near 24,035, Nifty500 has faced some resistance and is moving in a range. For Nifty500, breaking and sustaining above the 24,035 (52-week high) is crucial for the next leg of the bull run.

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 8th December triggering a ‘Curtail’ signal that suggests curtailing onto existing long positions.

• As of December 19, 2025, about 41%, 27% and 25% of stocks are above their 10EMA, 30EMA, and 50EMA respectively. Last week, these readings were similar, indicating not much change in market breadth this week.

• The short-term and medium-term structural stability across the board remains weak, with only 25% of stocks still trading below their 30EMA and 50EMA.

• The market breadth readings remain below the midpoint (50% mark), signaling that the majority of stocks are trading below short-to-medium-term trend levels, which is typically a corrective sign for the broader market.

• It’s 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 broader market continues to trade within a consolidation range, showing signs of caution. Market breadth remains a point of concern as only 25% of stocks are currently trading above their 30EMA and 50EMA, indicating that a significant portion of the market is still struggling to maintain short-term momentum. The aggressive selling trend seen from FIIs earlier in the month has begun to soften, providing the market with room to breathe. Investors and traders will be focusing to the coming week, looking for a ‘follow-through’ to confirm that the Friday’s reversal has the legs to challenge previous resistance levels.

Key Indices Performance:

Key Drivers This Week

• US Fed Rate Cut: Initial market fall was primarily driven by investor caution ahead of the crucial US Federal Reserve’s policy meeting (Dec 9-10), with uncertainty surrounding interest rate decisions. The US Federal Reserve’s decision to cut interest rates and offer a less hawkish future outlook provided a positive global cue, triggering the market rebound in the latter half of the week.

• Persistent FII Selling: Foreign Institutional Investors (FIIs) continued their selling streak

• Rupee weakens against dollar: The Indian Rupee touched a new record low against the US Dollar.

Technical Perspective

• Nifty 500 trend: Nifty500 showed a clear sign of weakness at the start of the week. The index broke below its short-term key moving averages (20EMA and Rising 50EMA). Despite late-week relief spurred by the US Fed’s anticipated rate cut, which allowed the index to reclaim and close above both the 20EMA and 50EMA, the index still managed to establish a new Lower Low for the period.

• The Nifty500’s 10EMA crossed under its 20EMA this week, serving as a technical signal for the curtailment of Long positions.

• In contrast, Benchmark indices (Nifty50 and Sensex) demonstrated relative resilience and strength by consistently respecting their respective Rising 50EMAs. Unlike the volatility seen in the broader market indices (Nifty500 or Nifty mid & small-cap indices), the Nifty50 and Sensex remain technically sound, with their major EMAs aligned in a bullish sequence (10 > 20 > 50 > 100 > 200EMA), thus reinforcing the strength and safety profile of large-cap stocks.

• Looking at the broader market indices:

  • The Nifty MidCap150 also briefly fell below its Rising 50EMA during the mid-week sell-off, though it successfully reclaimed this level by the end of the trading week.

  • The Nifty SmallCap250 continues to exhibit significant weakness, forming a Lower High, Lower Low price structure. Technically, the underlying trend remains bearish, with the key short-term EMAs (10EMA, 20EMA and 50EMA) all stacked one below the other.

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 8th December triggering a ‘Curtail’ signal that suggests curtailing onto existing long positions.

• As of December 12, 2025, about 41%, 25% and 25% of stocks are above their 10EMA, 30EMA, and 50EMA respectively. Last week, these readings were 23%, 21% and 23% respectively for stocks above their 10EMA, 30EMA, and 50EMA.

• The surge in the % of stocks above 10EMA (from 23% last week to 41% this week) indicates return of ultra-short-term momentum in the latter half of the week, driven by the strong buying on Thursday and Friday. However, the relatively smaller gains in the % of stocks above 30EMA and 50EMA suggest that while momentum is returning, medium-term structural stability across the board remains weak, with only 25% of stocks still trading below their 30EMA and 50EMA.

• The market breadth readings remain below the midpoint (50% mark), signaling that the majority of stocks are trading below short-to-medium-term trend levels, which is typically a corrective sign for the broader market.

• It’s 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

Indian equities experienced high volatility, falling early in the week before recovering to reclaim key moving averages; however, the market remains in a consolidation phase and established a new Lower Low this week. The overall trend remains positive, but technical signals suggest caution.

The Nifty500 technically flashed a ‘Curtail’ signal as the 10EMA crossed under the 20EMA. While market breadth showed a slight improvement with the return of ultra-short-term momentum, medium-term structural stability remains weak, limiting broad-based participation.

Large-caps continue to lead the market, maintaining their strong structures. Given the market’s inability to establish a decisive uptrend (Higher Highs and Higher Lows), it is prudent to stick with quality, leading stocks from the strongest sectors before adopting an aggressive stance. Continued volatility is expected, with a positive resolution to the India-US trade deal seen as the most powerful catalyst for igniting a sustained rally in the coming months.

Key Indices Performance:

Nifty50: -0.06% (made All Time High / ATH this week)

Sensex: +0.01% (made ATH this week)

Nifty500: -0.41%

Nifty Midcap150: -0.84%

Nifty Midsmallcap400: -1.04%

Nifty Smallcap250: -1.42%

Key Drivers This Week

• Rate cuts: The RBI delivered a 25 bps repo rate cut, which lifted sentiment on Friday and helped indices recover from mid-week weakness, even as commentary stayed cautious on inflation and liquidity.

• Rupee weakens against dollar: A key macro overhang this week was the sharp depreciation in the rupee, which briefly breached the ₹90/dollar mark and stayed near record lows.

• Large-cap stocks displayed stronger relative strength and outperformed mid- and small-cap stocks, this week as well.

Technical Perspective

• Nifty 500 trend: Moved in a narrow range of 1.64% for the entire week, indicating lack of strong momentum. It opened on Monday at a new ATH but then got sold into and drifted lower during the week. It held above its 20EMA and managed to close the week above this key moving average. The 20EMA above the rising 50EMA indicates larger market is stable. The Crossover of 10EMA over 20EMA that happened on 7^th October 2025 is also intact. All major EMAs are also aligned in a bullish sequence (10 > 20 > 50 > 100 > 200EMA), reinforcing the strength of the underlying trend.

• Benchmark indices such as Nifty50 and Sensex showed strength compared to Nifty500 by respecting their respective 20EMAs.

• Nifty500 slipped below its rising 20EMA early in the week but quickly reclaimed it by the week ended after RBI rate cut announcement. The index continues to make higher highs on the weekly chart and is consolidating near the upper boundary of its previous range.

• Nifty MidCap150 is currently trading above its 50EMA but is below its 20EMA.

• Nifty SmallCap250 shows a completely different picture. The price is forming a lower high, lower low structure with price just holding above its 200EMA while the 10EMA, 20EMA and 50EMA are all one below the other.

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 7th October triggering a ‘Stay’ signal that suggests holding onto existing long positions.

• The market breadth shows a grim picture of how the rally has been selective and that the broader market is generally weak. The percentage of stocks trading above the key moving averages continue to decline and it reflects the corrective phase of the market is continuing. The positive is that the crossover of 10EMA over 20EMA that happened on October 7^th is still holding good.

• As of December 5, 2025, about 23%, 21% and 23% of stocks are above their 10EMA, 30EMA, and 50EMA respectively. The market breadth readings remain below the midpoint (50% mark), signaling that the majority of stocks are trading below short-to-medium-term trend levels, which is typically a corrective sign for the broader market.

• Market breadth remains weak, and we are not in the oversold zone. It’s 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

Sectoral Performance

Private Banks seem to be holding the leadership position across weekly, monthly and 3-months time-frame while PSU Banks seems to be cooling off a bit. After a brief period of pause / consolidation, Automobile showed strength last week and Pharma is now appearing to be gaining strength. Private Banks are best positioned post RBI’s rate cut, with strong balance sheet and reasonable valuations. Auto stocks are showing strength with stable demands and probably positive perception due to rate cut.

Summary

While the trend is still up with Nifty500 making Higher Lows, the market is still in a consolidation and is unable to make a decisive uptrend structure of Higher High and Higher Lows.

Portfolios that have heavy tilt towards smallcaps could have seen a visible drawdown. Focusing on gradually accumulating good quality private banks and select auto stocks seem to be the most favored strategy. One needs to stay away from aggressive buying in smallcaps and maintain strict risk management to protect financial and mental capital. Blindly chasing momentum or “story stocks” without proper earnings backing will prove to be a costly decision. It’s better to focus on large and high quality midcap stocks and look to trade pullbacks, while keeping position size smaller and holding period shorter. This is essential as Breakouts seem to be lacking follow through moves and stocks that have run up in the recent past seem to round trip taking back most of the paper profits. Until Market Breadth improves and shows a broad based, sustained moves, it’s safer to stick with quality, leading stocks from the leading groups before getting aggressive.