F&O Talk: Smallcap index better placed than Nifty, says Sudeep Shah; picks 9 stocks for next week

Published 4 July 2026 · finance

The Indian stock market extended gains on Friday, with Sensex and Nifty rising more than 0.3% each due to easing Middle East conflict, lower expectations

The Indian stock market extended gains on Friday, with Sensex and Nifty rising more than 0.3% each due to easing Middle East conflict, lower expectations of Fed rate hikes, and other key factors.Sensex gained around 262 points to close at 77,764, while Nifty 50 rose more than 95 points to end the session above 24,270 during Friday's trading session. The sharp gains added nearly Rs 44,155 crore to the total market capitalisation of all companies listed on BSE, pulling it up to Rs 480 lakh crore. Analyst Sudeep Shah, Vice President and Head of Technical & Derivatives Research at SBI Securities, interacted with ETMarkets regarding the outlook for the Nifty and Bank Nifty, as well as an index strategy for the upcoming week. The following are the edited excerpts from his chat:Nifty has closed the week over a percent higher. What are crucial levels to track next week?The benchmark index Nifty remained confined to a narrow range of nearly 500 points over the past 13 trading sessions. On Friday, the index finally broke out of this consolidation, but the breakout lacked follow-through as profit booking emerged at higher levels, restricting further gains. Consequently, the index settled the week at 24,270, registering a gain of 0.89%. On the weekly chart, Nifty formed a bullish candle with shadows on both sides, reflecting continued indecisiveness among market participants. Notably, this marks the third consecutive week of an indecisive candlestick formation, highlighting the ongoing tug-of-war between bulls and bears. But beneath this seemingly directionless move, a completely different story is unfolding in the broader market.While the frontline indices continue to move cautiously, the Nifty Smallcap 100 is painting a completely different picture. The index has consistently outperformed the benchmark over the past few weeks and is now just a stone's throw away from its all-time high, whereas Nifty continues to trade nearly 8% below its record peak. Moreover, the relative strength chart of the Nifty Smallcap 100 against Nifty has climbed to an 81-week high, underscoring the sustained leadership of the broader market. Based on the prevailing chart structure, the bullish momentum in the small-cap segment is likely to remain intact over the next few trading sessions. The bigger question now is whether Nifty is preparing to follow this leadership or continue lagging behind.Turning back to Nifty, the index continues to trade comfortably above its 20, 50, and 100-day EMAs, indicating that the broader trend remains positive.

In addition, the daily RSI has moved above the 60 mark, signaling strengthening bullish momentum. Going forward, the 200-day EMA zone of 24,400–24,450 is expected to act as a crucial resistance area. A decisive move above 24,450 could trigger a fresh leg of the rally towards 24,700, followed by 24,900 in the short term. On the downside, the 100-day EMA zone of 24,150–24,100 is likely to provide immediate support. A breach below 24,100 could expose the index to the next important support zone near the confluence of the 20 and 50-day EMAs, currently placed around 23,920–23,880. With the market approaching a crucial technical juncture, the next few sessions could decide whether this breakout evolves into a sustained rally or another false start.In June, Sensex largely remained range-bound, oscillating within a 4500-point band. What's your outlook for July?The benchmark index Sensex registered a breakout from a 13-day consolidation phase on Friday. However, the index could not sustain at higher levels and witnessed profit booking, eventually closing the week with a gain of 0.87%. On the weekly chart, Sensex formed a bullish candle with shadows on both sides, marking the third consecutive week of such a formation, indicating indecisiveness despite a positive bias.Technically, the index continues to trade above its 20, 50, and 100-day EMAs, with the 20 and 50-day EMAs gradually trending higher, reflecting a constructive undertone. The daily RSI has moved above the 60 mark and remains on an upward trajectory, suggesting strengthening momentum. However, the daily ADX stands at 13.39 and continues to decline, indicating that the current trend lacks strong directional conviction.Going forward, the 78,300-78,500 zone is likely to act as a key resistance area as prior swing high is placed in that region. A decisive and sustained move above 78,500 could trigger a fresh leg of rally towards 79,200, followed by the psychological 80000 mark in the near term.On the downside, the 20 and 50-day EMA zone of 76,500-76,400 is expected to provide strong support. As long as the index holds above this zone, the broader short-term outlook is likely to remain positive.After June's expiry and the start of a new series, what do F&O positioning and open interest trends suggest?After the June expiry and the start of the new series, F&O positioning points to a constructive undertone for Nifty. Between June 15 and July 2, the index consolidated in the 23,785–24,262 range while open interest declined 7.11% despite a 1.06% rise in price, indicating gradual short covering rather than fresh short buildup.