Indian equity markets are facing mounting pressure as benchmark indices slip below critical technical support levels, with analysts warning of potential deeper corrections in the near term. The market weakness has intensified concerns about the sustainability of recent recovery attempts.

Technical Breakdown Signals Bearish Phase

According to Manish Hathiramani of Deen Dayal Investments, the Nifty has entered a short-term bearish phase after failing to maintain important support levels. The index has broken below both recent lows and the 200-day moving average, significantly increasing correction risks.

Hathiramani identifies the 24,950 to 25,000 zone as critical for market direction. Sustained trading below this range could trigger a deeper fall toward the 24,500 level, while upside resistance is now capped at 25,600 to 25,700 levels.

Market Outlook and Trading Strategy

"We are in a definite short-term bear market," Hathiramani stated. "I would be looking at any kind of rise to look for opportunities to go short, unless we are able to get past those capped resistance levels." This cautious stance reflects the deteriorating technical environment across major indices.

Bank Nifty's weakness has added to near-term uncertainty, as the banking index had previously provided support to the broader market during recent sessions.

Selective Opportunities Amid Correction

Despite the technical breakdown, Gautam Baid, Equity Advisor at Complete Circle Stellar Wealth PMS, believes the correction is creating selective opportunities for discerning investors. "This is the market for bottom-up active stock picking, and you have to focus on areas which have got good earnings growth visibility for the next one to two years," he explained.

Baid highlighted several segments showing earnings resilience despite broader market weakness:

• Microfinance-focused lenders
• Gold financing companies
• Silver-related plays
• Parts of the auto ancillary space

These sectors have demonstrated improving fundamentals in recent results, offering potential opportunities for selective investors.

Market Breadth and Recovery Prospects

Market breadth indicators suggest the broader market may be approaching a zone where corrections historically tend to stabilize, according to Baid. However, he cautioned that any potential recovery is unlikely to be uniform across sectors, emphasizing the importance of selective stock picking in the current environment.

The combination of technical weakness and fundamental divergence across sectors is creating a challenging environment for investors, requiring careful analysis of both technical levels and earnings visibility for successful navigation of current market conditions.

Pankaj Tibrewal, Founder and CIO of IKIGAI Asset Manager, expects significant improvement in market earnings, with Nifty earnings growth projected to accelerate from around 8.00-8.50% in FY26 to 12.00-13.00% in FY27. According to Tibrewal, earnings acceleration represents the key trigger for markets moving forward, positioning India favorably despite current global uncertainties.

Current Earnings Performance

The ongoing earnings season has delivered results largely aligned with market expectations. While some impact emerged from labour code-related provisions, particularly affecting IT companies, overall corporate performance has remained reasonable across sectors.

Tibrewal noted that most IT companies and banks have reported satisfactory numbers, with the broader market earnings season now gaining momentum.

Market Positioning and Outlook

Indian stock markets are experiencing volatility amid global geopolitical tensions, foreign investor selling, and rupee depreciation. However, Tibrewal attributes the recent correction primarily to global uncertainty rather than domestic fundamental weakness. He emphasized that India remains well-positioned from a medium to long-term perspective, particularly once geopolitical noise and US market corrections are factored into valuations.

Sectoral Investment Opportunities

Several sectors have emerged as attractive investment opportunities following recent market corrections:

Banking Sector: Private sector banks appear particularly well-placed in the current environment, offering compelling value propositions after recent adjustments.

Pharmaceutical Sector: Both CDMO (Contract Development and Manufacturing Organization) players and domestic generic companies are showing improved attractiveness after a period of weakness.

Automotive Sector: Auto and auto ancillary stocks, which demonstrated strong momentum earlier, have corrected in recent weeks, creating potential buying opportunities for investors.

Capital Goods: Select companies with strong order books and multi-year visibility have become focus areas as valuations have reached more reasonable levels compared to historical periods.

Commodities and Metals Outlook

Tibrewal maintains a positive stance on metals, particularly non-ferrous metals including copper and aluminium. He believes natural resources will increasingly function as tools of geopolitical negotiation, enhancing commodity values over time. Rising demand coupled with developing supply gaps in key metals supports this optimistic outlook.

For steel specifically, while the third quarter may remain subdued due to earlier price weakness, recent domestic market price increases could generate positive surprises in fourth-quarter earnings if current trends sustain.

Investment Strategy

The investment approach focuses on sectors with strong fundamentals that have experienced reasonable corrections, creating entry opportunities. Companies with robust order visibility, reasonable valuations, and multi-year growth prospects represent preferred investment themes in the current market environment.