Indian equity markets are showing early signs of stabilisation after weeks of volatility, with the Nifty consolidating around key support levels. Technical analyst Nagaraj Shetti from HDFC Securities has identified potential bottom formation signals that could indicate a market reversal.

Speaking to ET Now, Shetti highlighted that the index has been experiencing high volatility near the 25,500–25,600 zone, but consistent buying from lower levels suggests a potential bottom reversal in the making.

Nifty Technical Outlook: Strong Support Base Emerges

The technical analysis reveals that Nifty has repeatedly found support near 25,500, indicating strong buying interest at these levels. Shetti noted that the market has been consolidating around these levels, with the last two sessions confirming that 25,600 is acting as a solid base.

On the upside, 26,000 remains the immediate hurdle. Shetti expects some consolidation near 26,000, but once crossed, the index could move towards 26,200–26,300 in the near term, while advising caution amid ongoing volatility.

Sector Rotation Favours Metals and Oil Refining

According to Shetti, sector rotation is clearly visible, with renewed strength emerging in metals and oil refining stocks following a phase of correction. This shift presents specific opportunities for investors focusing on technically strong setups.

MRPL Shows Decisive Breakout Potential

Shetti highlighted MRPL as a preferred pick from the oil refining space. After a prolonged decline, MRPL has seen a strong rebound and is showing a decisive upside breakout.

SAIL Displays Bullish Flag Pattern

From the metals segment, Shetti remains bullish on Steel Authority of India, which has formed a bullish flag pattern after a consolidation phase.

Tata Steel Leads Metal Rally

On the broader metal pack, Shetti confirmed that momentum remains firmly positive, with Tata Steel and SAIL leading the rally. The recent upward move in Tata Steel marks a clear breakout from its consolidation zone, with the stock potentially moving towards ₹202.00–203.00 in the near term.

Insurance Sector Remains Under Pressure

Commenting on ICICI Lombard General Insurance, Shetti noted that the stock remains in a downtrend with no clear reversal signals yet. The ₹1,800.00 level could act as strong support, but investors should wait for base formation before taking fresh positions.

Investment Strategy and Risk Management

While broader sentiment remains cautious, technical indicators suggest that the Nifty may be forming a base near current levels. Select opportunities are emerging in metals and oil refining stocks, but Shetti advises investors to remain disciplined, focus on stock-specific setups, and use strict stop losses amid continued market volatility.

The Nifty index demonstrated mixed signals during the latest trading session, opening with substantial strength but facing persistent selling pressure that dominated most of the day's proceedings. The benchmark index began trading with a notable gap-up of nearly 100 points, suggesting initial bullish sentiment among market participants.

Intraday Price Action and Market Dynamics

Despite the strong opening, the Nifty failed to sustain its early momentum as selling pressure emerged from the very first tick of trading. This bearish sentiment triggered a gradual but consistent decline throughout most of the session, effectively wiping out gains accumulated during the previous trading day.

The index's performance showed clear signs of weakness as bears took control, pushing prices lower across multiple sectors. However, the decline was not without resistance, as certain support levels provided temporary relief to the downward pressure.

Critical Support Level and Recovery Attempt

A significant development occurred when the Nifty found substantial support near the 25,600 zone, which acted as a crucial cushion against further decline. This support level proved effective in halting the bearish momentum and provided the foundation for a mild recovery during the final hour of trading.

Technical Chart Analysis

The daily chart analysis reveals important technical formations that could influence future price movements. The Nifty formed a distinctive bearish candle characterized by a long lower shadow, indicating significant intraday volatility and potential reversal patterns.

This candlestick formation suggests that while bears dominated the session, bulls managed to push prices higher from the day's lows, creating the extended lower shadow. Such technical patterns often signal potential trend reversals and provide valuable insights for strategic positioning.

Market Implications and Trading Considerations

The combination of the gap-up opening, subsequent decline, and recovery from support levels creates a complex technical picture. The formation of a bearish candle with a long lower shadow, coupled with the support at 25,600, suggests that the index may be showing early signs of a potential reversal from current levels.

Market participants should closely monitor how the index behaves around the identified support zone, as this level could determine the near-term directional bias for the benchmark index.