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Indian benchmark indices extended their decline for the second straight session on Tuesday, as a cautious risk-off sentiment gripped Dalal Street. The Nifty 50 closed at 26,178.70, down 0.27%, while BSE Sensex shed 376.28 points to settle at 85,063.34. Market breadth remained decisively bearish, with an advance-decline ratio of 1,239 to 1,894, indicating broad-based selling despite stability in the mid-cap segment.

Heavyweights like Reliance Industries (-4.3%) and Trent (-8.6%) were the primary laggards, with the former reacting to US President Donald Trump’s recent warnings regarding potential tariffs on India over Russian oil purchases. Conversely, defensive buying in Healthcare (+1.85%) and Pharma, alongside a 2.9% jump in ICICI Bank, helped cushion the indices. Elevated volatility fueled by geopolitical developments in Venezuela and evolving trade policies from Washington is expected to keep investors on edge as we enter the Q3 earnings season.

Why it’s recommended: Strong improvement in asset quality with declining GNPA and NNPA, credit growth supported by retail, MSME, and corporate demand, improving profitability driven by better net interest margins, reduced provisioning burden enhances earnings visibility, adequate capital position supported by government backing, and a beneficiary of PSU bank consolidation and scale advantages.

Key metrics: P/E: 6.72 | 52-week high: ₹167.30 | Volume: ₹455.29 crore

Technical analysis: Cup-with-handle breakout

Risk factors: Higher exposure to stressed corporate and PSU-linked sectors, margin pressure risk if interest rates decline sharply, slower decision-making compared to private sector peers, asset quality may weaken during economic slowdown cycles, government ownership limits operational flexibility, competition from private banks, and fintech players remains intense.

Buy: ₹165-168

Target price: ₹188 in two to three months

Stop loss: ₹156

Why it’s recommended: Strong domestic and international brand presence with diversified revenue streams, recovery in margin profile aided by softer raw material prices, focus on premium and value-added tyre segments improves profitability, consistent capacity expansion and product innovation initiatives, and improving balance sheet and steady operating cash flows

Key metrics: P/E: 40.90 | 52-week high: ₹540.50 | Volume: ₹101.01 crore

Technical analysis: 50-DMA reclaim

Risk factors: Earnings are sensitive to volatility in rubber and crude-linked input costs, cyclical demand from auto and replacement markets can impact volumes, intense competition from domestic and global tyre manufacturers, currency fluctuations affect overseas operations and profitability, and a slowdown in the global or Indian auto industry may weigh on growth.

Buy at: ₹514-524

Target price: ₹590 in two to three months

Stop loss: ₹490

Indian equities ended marginally lower on Tuesday, with benchmarks consolidating after recent gains amid mixed sectoral cues. The Nifty 50 closed at 26,175.6, down 74.7 points or 0.28%, while the Sensex also slipped in tandem, reflecting subdued risk appetite through the session. The Nifty traded in a narrow intraday range of 26,124-26,274, facing selling pressure near 26,250-26,300, which continues to act as an immediate hurdle.

On the downside, 26,100 remains a key short-term support to watch. Market breadth was negative, underscoring the cautious undertone, with 1,239 stocks advancing against 1,894 declines, while 104 remained unchanged.

On the sectoral front, defensives and selective growth pockets outperformed: Nifty Healthcare (+1.85%), Pharma (+1.69%), and IT (+0.55%) witnessed steady buying interest, supported by stock-specific traction. Financials were mixed, with Nifty Financial Services gaining modestly, while Private Banks ended up flat. In contrast, Oil and Gas (-1.75%) and Media (-1.05%) were notable laggards, weighing on the headline indices.

The Nifty 50 continues to trade within a well-defined rising channel, highlighting that the primary trend remains positive despite near-term consolidation. From a trendline perspective, prices are still respecting the upward sloping structure that has been in place since the August lows, reinforcing the medium-term bullish bias. The index also remains above its key short- and medium-term moving averages, reflecting trend stability.

Momentum indicators point to consolidation rather than weakness. The RSI is holding above the neutral 56 mark, but has flattened and formed a mild negative slope, indicating slowing momentum after the recent up move. Meanwhile, the MACD remains in positive territory, although the histogram has narrowed, signalling waning bullish momentum and a phase of range-bound action.

According to O'Neil’s methodology of market direction, the market status has shifted to a "Confirmed Uptrend" as it decisively surpassed its previous rally high of 25,670 to register a new 52-week high. Looking ahead, we will maintain the Confirmed Uptrend stance as long as market action remains constructive. However, if the distribution day count rises or Nifty breaches key support levels, we may shift the outlook back to an Uptrend Under Pressure to reflect elevated risk.

The index has seen a modest pullback from its all-time high levels. However, this retracement does not signal any deterioration in underlying market sentiment. The broader technical structure remains constructive, with the prevailing trend firmly intact.

A sustained move above 26,300 would reinforce the bullish setup and is likely to trigger the next leg of the rally, opening the door for an advance toward 26,500–26,700 in the near term. On the downside, 25,900 serves as the first area to monitor in the event of a corrective phase. A deeper decline toward 25,500 would be viewed as a healthy retracement, as this region represents a strong demand area and continues to underpin the medium-term uptrend.

The Nifty Bank opened on a positive note at 59,957.80 and witnessed mild intraday volatility during the early hours. After slipping to its intraday low of 59,844.80, the index found buying interest at lower levels and staged a steady recovery through the session. Buying momentum persisted in the latter half, enabling the index to scale an intraday high of 60,305.00 before settling at 60,118.40, ending the day in the green.

The positive close reflects sustained demand near support zones and an absence of aggressive selling pressure. The structure of the day’s candle indicates controlled accumulation rather than speculative excess. Overall, the session highlights resilience in the banking pack, with market participants continuing to favour declines as buying opportunities amid a broader bullish undertone.

From a momentum perspective, the RSI (14) is placed near 66, remaining comfortably above the neutral 50 mark, which indicates sustained bullish momentum without entering extreme overbought territory. The RSI’s upward bias suggests strength is still intact, though incremental gains may now be more measured.

The MACD remains in positive territory, with the MACD line holding above the signal line, reflecting an ongoing bullish trend, albeit with some loss of momentum compared to earlier sessions. Histogram bars appear modest, pointing to consolidation rather than trend reversal. As per O’Neil’s market direction framework, the Nifty Bank remains in a Confirmed Uptrend. Structurally, the index continues to trade above key moving averages, reinforcing medium-term trend strength.

The Nifty Bank regained its winning momentum and concluded the session on a positive note. The index continues to trade comfortably above all key moving averages, underscoring the strength of the underlying trend. Sustained a follow-through buying interest may gradually propel the index toward 60,500–61,000 in the forthcoming sessions. That said, in the near term, intermittent profit booking or a phase of sideways consolidation cannot be ruled out, given recent gains. On the downside, 58,500–58,000 remains a critical and well-defined support zone, which is expected to absorb corrective pressure and help maintain the broader positive medium-term outlook for the index.

MarketSmith India is a stock research platform and advisory service focused on the Indian stock market. It offers tools and resources to help investors make informed decisions based on the CAN SLIM methodology, founded by legendary investor William J. O'Neil. You can access a 10-day free trial by registering on its website.

Trade name: William O’Neil India Pvt. Ltd.

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Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.

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