Gautam Shah, founder and chief strategist of Goldilocks Global Research, has outlined an optimistic outlook for Indian equity markets, despite recent market negativity. Speaking in an exclusive interaction, Shah emphasized that the current Nifty levels around 26,200 demonstrate the market's underlying strength.

Market Outlook and Target Levels

Shah believes the equity indices are positioned for significant upward movement, driven by strong macro fundamentals and earnings outlook. He has set specific targets for the benchmark index based on technical analysis.

The market veteran noted that Nifty had a recent breakout and expects the index to move past 26,250 levels to reach the near-term target of 26,700. "Markets are headed for much higher levels. The earnings results coming in January might just validate the government measures that came up in the last 6-8 months," Shah explained.

Sectoral Opportunities

Shah has identified two specific sectors as the primary opportunities, based on both technical and fundamental analysis.

Metals Sector Leadership

The metals sector emerges as Shah's favorite pick. He highlighted that non-ferrous stocks have performed exceptionally well, positioning the sector for continued strength. The expert believes this sector offers significant potential amid the current market environment.

PSU Sector as Top Opportunity

Shah designated the PSU space as the "top opportunity," citing multiple favorable factors:

• Technical Position: Strong technical setup after consolidation
• Fundamental Strength: Solid underlying fundamentals
• Market Position: Under-owned sector emerging from 18 months of consolidation
• Timing: Positioned for breakout after extended consolidation period

Market Dynamics and Volatility Indicators

The market expert pointed to the India Volatility Index (VIX) as a key indicator supporting his bullish outlook. With VIX trading in single digits, Shah noted this historically signals potential market rallies. "We never have a market top or a major correction with VIX at such low levels," he emphasized.

Shah expects the equity market to become more broad-based going forward, with opportunities shifting from the top 100 stocks to the broader universe of 500-1,000 stocks. This suggests potential outperformance in mid-cap and small-cap segments in the near future.

Sector Performance Assessment

While backing metals and PSUs, Shah provided a mixed outlook for other sectors:

Banking Sector: Made a strong comeback and continues to show promise

IT Sector: Despite recent gains, Shah views the recovery as potentially temporary due to:

• Ongoing headwinds in the sector
• Weak relative strength charts
• Valuation concerns
• AI disruption impact

Traditional Winners: Infrastructure, defense, and railways sectors have "lost the plot" according to Shah, suggesting investors should focus on newer opportunities rather than past winners.

Shah concluded that generating alpha and returns requires focused effort on specific sectors, with metals and PSUs representing the most compelling opportunities based on current market positioning and fundamental outlook.

Market analyst Rohit Srivastava expects Indian equity markets to remain range-bound in the near term before attempting a decisive breakout. The Founder of Strike Money Analytics and Indiacharts shared his technical outlook with ET Now, highlighting key levels and sector preferences for the coming period.

Nifty Technical Outlook

Srivastava identifies crucial technical levels for the Nifty's near-term trajectory. He expects the index to consolidate around current levels with specific support and resistance zones.

"Over the next couple of days, the Nifty should head towards 26,500, which is an important breakout level. This corresponds to the trend line connecting the previous highs seen between October and November," Srivastava explained. A successful move above 26,500 could generate stronger momentum ahead of the monthly derivatives expiry.

IT Sector: Mixed Signals

The IT sector faces headwinds following reports about changes to the US H-1B lottery system. Srivastava maintains a cautious stance on long-term IT investments while seeing short-term trading opportunities.

"From a trading perspective, the current dip can still be seen as a buying opportunity. The IT index could move towards 40,000 or slightly higher in the short term," he noted. However, he emphasized that IT stocks have historically underperformed broader markets during growth cycles, particularly given modest earnings growth expectations.

Metals Sector Preference for Santa Rally

Looking toward the final week of December, Srivastava expresses optimism about a potential Santa rally, with global markets showing supportive trends across Asian markets and Wall Street. His sector preference focuses on metals.

"The environment is gradually turning favourable for commodities, with a weakening US dollar and rising prices of metals like copper and aluminium," Srivastava observed. He specifically highlighted stocks such as Hindalco and National Aluminium, which have demonstrated strong momentum and could continue outperforming in the near term.

Investment Strategy

Srivastava advises investors to maintain selectivity in their approach, closely monitor key technical levels, and align short-term trades with sectors benefiting from favorable global macro conditions. The combination of technical breakout potential in the Nifty and commodity sector strength presents opportunities for tactical positioning in the current market environment.