Indian equity markets continue to face headwinds as the Nifty repeatedly fails to decisively cross the 26,200 level, even while global markets trade near record highs. Market expert Gautam Shah, Founder of Goldilocks Global Research, suggests this consolidation phase presents selective opportunities despite broader market weakness.

Market Outlook and Key Levels

Speaking to ET Now, Shah indicated that the market has developed resistance near the 26,200 mark after multiple failed breakout attempts over the past three months. However, he views the current phase as consolidation rather than a bearish trend.

"The 25,450 level is extremely important for the Nifty. As long as the index holds above this support, there is a strong possibility of a rebound, especially with the Union Budget just days away," Shah explained. A decisive break below this level would be concerning from a medium-term perspective.

Sector-Specific Opportunities

PSU Banks Show Continued Promise

Shah remains bullish on public sector banks, which have significantly outperformed private lenders over the past year. The PSU Banking Index has already achieved the 9,000 target outlined in earlier reports, yet further upside potential remains.

"There are no signs of topping out yet. There could be another 2,000-point upside in the PSU banking index, led by the top four or five names," Shah noted, adding that valuations remain comfortable and under-ownership continues to support the theme.

Metals Emerge as Multi-Year Trade

Shah reiterated his bullish stance on metals, calling it one of the strongest emerging themes in both Indian and global markets. Despite fundamentals appearing weak six months ago, price action indicated a shift now supported by improving fundamentals.

"Hard assets have been extremely exciting over the last six months," Shah observed. The rally is expected to broaden, with ferrous metals and steel producers participating alongside base metals such as copper, aluminium and zinc.

Sectors to Approach with Caution

Shah maintains a cautious stance on FMCG and IT stocks. FMCG companies continue trading at rich valuations while clarity on sustained consumption recovery remains lacking despite recent GST cuts.

"I would prefer to wait for a full quarter of results before taking a confident call on FMCG. The index has been among the worst performers, and valuations remain expensive," he stated.

Regarding IT stocks, Shah cited valuation concerns, AI-led disruption, and better technology opportunities in global markets as reasons for his negative outlook on Indian IT companies.

Investment Strategy

Shah advised investors to stay concentrated rather than over-diversified, focusing on sectors showing relative strength and reasonable valuations. While sentiment remains weak, particularly in small- and micro-cap stocks, technical indicators suggest risk-reward is gradually turning favorable for selective long positions.

Overall, Shah believes the current underperformance of Indian markets relative to global peers is temporary. A budget-led trigger combined with strong global markets could help the Nifty regain momentum, provided key support levels remain intact.

The broader markets extended their decline during Tuesday's trading session, with mid and small-cap indices significantly underperforming the benchmark Sensex and Nifty. The selling pressure was particularly evident in the broader market segments, reflecting weak investor sentiment across various sectors.

Market Performance Overview

The benchmark indices traded lower throughout the session, with both Sensex and Nifty posting notable declines. The broader market indices witnessed even steeper falls, indicating profit-booking across mid and small-cap stocks.

Technical Breakdown in Midcap Segment

The Nifty Midcap 100 slipped below its crucial 100-day moving average during intraday trade, reaching 58,510.60. This technical breakdown suggests weakening momentum in the mid-cap space and could indicate further selling pressure in the near term. The breach of this key technical level is significant as the 100-DMA often serves as an important support and resistance level for traders and investors.

Oberoi Realty Leads Decline

Oberoi Realty emerged as the biggest laggard in the midcap segment, with real estate stocks witnessing sharp declines. The selling pressure in real estate companies was primarily attributed to weak investor sentiment following Oberoi Realty's Q3 earnings announcement.

Oberoi Realty Q3 Financial Performance

The company reported mixed quarterly results that disappointed market participants:

The company's consolidated net profit showed marginal year-on-year growth of 0.69 percent but declined significantly by 18 percent on a quarter-on-quarter basis. While net sales grew 5.78 percent year-on-year, the sequential decline in profitability raised concerns among investors about the company's operational efficiency and market conditions.

Sector-Wide Impact

The weakness in Oberoi Realty had a cascading effect on other real estate stocks, with the entire sector experiencing one of its worst trading sessions in six months. The profit-booking activity extended beyond individual stock performance, reflecting broader concerns about the real estate sector's near-term prospects and valuation levels after recent gains.