HDFC Securities' Senior Technical and Derivative Analyst Vinay Rajani has identified two ETF investment opportunities amid ongoing market volatility, as domestic indices showed mixed performance with underlying technical concerns.

Market Performance and Technical Analysis

The Nifty 50 and Sensex recovered from initial losses, with the Nifty 50 gaining 0.30% to close at 25,758.80 and the Sensex advancing 0.11% to 83,670.46 as of 14:35 IST. Both indices had earlier declined by 0.80% during the trading session before staging a recovery.

Rajani's technical analysis reveals significant concerns for the Nifty 50, which has witnessed a fall of more than 800 points from its recent swing high of 26,373.00. The index has formed a triple top pattern near 26,300.00 and has now moved below its 20, 50, and 100-day EMAs, indicating a shift towards a positional downtrend.

Key Technical Levels and Resistance Points

The analyst identifies several critical technical levels for market participants to monitor:

• Immediate Resistance: 25,700.00 (previous swing high) for potential pullbacks
• Positional Resistance: 26,050.00-26,100.00 band
• Next Support Levels: 25,300.00, followed by 200 DEMA at 25,138.00
• Critical Level: 100 DEMA at 25,618.00 (break below could trigger further decline to 25,315.00)

The India VIX has bounced from its 52-week low of 8.72 to approximately 10.93, registering a 3.11% gain on January 9, 2026, signaling emerging caution among investors after prolonged subdued volatility.

ETF Investment Recommendations

Despite equity market concerns, Rajani has identified two precious metal ETFs showing strong technical patterns:

HDFC Gold ETF

The Gold ETF demonstrates several positive technical indicators:

• Higher tops and higher bottoms formation on weekly and monthly charts
• Positioning above all key moving averages across timeframes
• Weekly RSI sustaining above 50, indicating sustained uptrend
• MACD positioned above signal and zero line on weekly and monthly charts
• Price rise accompanied by healthy volumes

HDFC Silver ETF

The Silver ETF shows similar technical strength with additional confirmation from short-term moving averages placed above long-term moving averages, reinforcing the uptrend across multiple timeframes.

Market Outlook and Strategy

Rajani believes the Nifty 50 has likely made a short-term peak near 26,300.00 and reversed its trend downwards. The analyst recommends that traders utilize bounces to lighten long commitments, particularly given the death crossover observed in microcap and smallcap indices where 50 DEMA has crossed below 200 DEMA, indicating increased vulnerability in smaller stocks.

HDFC Securities expects earnings growth to accelerate significantly in the upcoming fiscal year, though market returns may remain constrained by current valuations. Varun Lohchab, Head of Institutional Research at HDFC Securities, projects earnings growth of 12-13% for the 250 stocks under the firm's coverage in FY27, representing an improvement from the anticipated 10% growth in FY26.

Earnings Quality Expected to Improve

The research head emphasized that "the quality of earnings will be better in FY27," highlighting a fundamental shift in growth drivers. FY26 growth was primarily propelled by commodity-linked sectors such as oil & gas and metals, which typically command lower price-to-earnings multiples. This contrasts sharply with the expected FY27 performance, where growth is anticipated to be driven by higher-quality sectors.

Key Sector Recovery Anticipated

The projected improvement stems from expected recovery in three major market segments that collectively represent approximately 60% of the market capitalization:

• Banking, Financial Services and Insurance (BFSI)
• Information Technology (IT)
• Consumer sectors

These sectors traditionally trade at higher price-to-earnings ratios compared to commodity-linked industries, suggesting improved earnings quality in the coming fiscal year.

Limited Market Upsides Despite Growth

Despite the positive earnings outlook, HDFC Securities remains cautious about market returns. From current Nifty levels around 26,000, the absolute upside over the next 6-12 months is projected to be limited to 8-10%. Lohchab attributes this constraint to current market valuations, which are expected to cap potential gains.

Given these conditions, the firm recommends a strategy of buying on dips and maintaining a disciplined, stock-specific investment approach.

Strategic Sector Positioning

HDFC Securities has outlined its current sector allocation strategy based on expected performance and valuations:

The firm is actively reducing its underweight positions in consumer staples and IT sectors, moving them closer to neutral allocations. Conversely, it maintains underweight positions in oil & gas and cement while trimming exposure to metals toward neutral or slightly underweight positions.

Market Outlook and Investment Strategy

The research indicates a fundamental shift in market dynamics, with growth expected to transition from commodity-driven sectors to quality sectors that traditionally command premium valuations. However, the current market environment suggests that investors should temper return expectations despite improving earnings fundamentals.

The combination of better earnings quality and sector rotation toward higher-multiple industries presents a mixed outlook for investors, with improved fundamentals offset by valuation constraints in the near term.