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Change of baton to continue momentum towards life highs!

ICICIdirect Research 31 Oct 2025 DISCLAIMER

Nifty concluded eventful week on a flat note at ~ 25700 levels amid elevated volatility tracking tariff development and US Fed outcome. Midcaps outshone benchmark by gaining 1.5% lead by PSU Banks, Oil& Gas and Metal stocks

Key Highlight:

The index has undergone healthy consolidation over second consecutive week as profit booking in recently rallied large caps, resulted into breather at psychological mark of 26000 amid overbought condition tracking last four weeks 1500 points rally. Meanwhile midcaps regained momentum with improved market breadth
FIIs were holding near 1.92 lakh net short contracts at the start of October series which have declined significantly to near 1 lakh contracts at the inception of November series
While FIIs have paused selling and turned net buyers in October as they bought nearly 20000 crores in October series, the recovery in Nifty of nearly 1500 points can also be attributed to significant short covering seen during the series.

What to expect:
Current consolidation offers incremental buying opportunity to ride next leg of up move towards All Time high of 26300 in the coming month.
Sector rotation: While sectors like private banks, auto, IT have paused for a breather, momentum is shifting towards, Metal, PSU Banks, Oil & Gas. This sectoral rotation signals a constructive baton change that could help in durability of ongoing uptrend amid global volatility, evolving tariff development and ongoing earnings season.
Going ahead, we believe that fresh round of covering trend may take Nifty towards new highs in coming weeks. In terms of sectors, private sector banking and technology heavyweights are holding high short positions in the November series. Thus, stocks from these sectors should be in focus from the short covering perspective.
Midcap: Mirroring the Nifty, Midcap index resolved out of one year downward slanting trend line, indicating resumption of uptrend after one year hiatus
Market breadth: Amidst ongoing consolidation, market breadth has seen improvement as currently 64% stocks of Nifty 500 are trading above their 200-day EMA compared to one month rolling average of 56, indicating broader participation of the rally.


Key Monitorable:
Monthly Auto sales numbers
FII's have turned positive after three months sell-off. Continued buying spree would boost market sentiment
Development on India-US tariff negotiations
Progression of Q2FY26 earning season
Gold: on expected lines, Gold has taken a breather amid overbought conditions. We expect gold to undergo healthy consolidation in $4400-$3700 range

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