India IT stocks signal bottom as derivatives point to recovery
Technical indicators and derivative positioning suggest India's beaten-down IT sector may be carving a bottom, even as broader Nifty indices face caution following renewed US-Iran tensions.
India's benchmark Nifty index snapped a four-week winning streak following geopolitical tensions after the US revived strikes on Iran. While markets have recovered most of the initial mid-week losses, Friday's close below that session's peak suggests underlying caution. Further upward momentum now depends on the index holding above the 24090 to 24170 support zone.
Within this mixed broader market, the Nifty IT index stands out after posting a 2% weekly gain. The risk-reward profile for the sector is steadily improving as technical charts indicate waning downside momentum. The weekly relative strength index has turned up from oversold territory, and the moving average convergence divergence indicator is nearing a bullish crossover that historically marks the exhaustion of a prolonged corrective phase.
For investors assessing whether the tech selloff has run its course, the derivatives market provides compelling evidence of a shifting sentiment. Nearly 80% of IT stock futures recorded fresh long additions or short covering on Friday. Options traders are actively defending lower levels through short build-ups in approximately half of the near out-of-the-money put strikes, while the daily timeframe reclaimed its Supertrend resistance to reinforce the likelihood of a near-term floor.
The technical landscape diverges sharply in the consumer and retail segments. Kalyan Jewellers surged 25% to a 52-week high, breaking out of a multi-month consolidation pattern, though it faces turbulence until the 480-490 resistance region is cleared. Conversely, Trent plummeted 13% following a disappointing first-quarter update that triggered a structural break. Bearish momentum is slowing near the 2900 support, potentially prompting a temporary swing toward 3050, though sustainability remains uncertain.
Among specific trading setups, BlackBuck has confirmed a breakout from a prolonged horizontal range, targeting 625 with a stop-loss at 554. This move is supported by a weekly MACD bullish crossover and a daily RSI holding firmly above 60. Meanwhile, SWSOLAR is showing a healthy pullback within an emerging uptrend, forming a bullish reversal candle near its 38.2% Fibonacci retracement level. With the RSI staying above 55 and downside selling pressure fading, the stock offers a target of 258 against a 224 stop-loss.
