Nifty IT’s 18% rally may mark a durable leadership cycle; 35,000 next: LKP's Vatsal Bhuva

Edited excerpts from a chat:

Nifty gained around 2% in October, but the Nifty 500, midcaps and smallcaps have remained under pressure. Is this a genuine market recovery or merely a narrow largecap-led bounce?

The divergence in market performance suggests that the ongoing recovery remains selective and largely driven by heavyweight large-cap stocks, rather than signalling a broad-based market turnaround.

The October recovery was largely driven by a handful of heavyweight large-cap stocks rather than broad-based market participation. Nifty gained 1.91% during the month, whereas the Nifty Midcap 150 and Nifty Smallcap 100 indices declined 3.75% and 4.06%, respectively. Stocks from sectors such as IT, pharmaceuticals and banking contributed significantly to the Nifty's outperformance, particularly during the last week of October. This was also supported by the global rotation away from AI and semiconductor stocks amid profit booking.

Going ahead, continued profit booking in global AI-related stocks could potentially benefit Indian IT companies. However, the divergence in market performance suggests that this is still a selective, largecap-led recovery rather than a broad-based market turnaround.

The Nifty IT index rose about 18% in October, sharply outperforming the broader market. Is this the start of a durable leadership cycle or an oversold technical rebound?

The technical setup in Nifty IT indicates the possibility of a durable leadership cycle, supported by improving momentum and a potential global capital rotation from AI and semiconductor stocks towards Indian IT companies.

The technical structure of the Nifty IT index indicates the possibility of a durable leadership cycle rather than just an oversold technical rebound. The index has taken support near its 38.2% Fibonacci retracement level during the recent profit-booking phase. More importantly, the monthly RSI has entered a bullish crossover for the first time since January 2025, indicating a significant improvement in underlying momentum. The index has also reclaimed its short-, medium- and long-term moving averages, along with its 50-week SMA. These developments indicate improving technical strength, with 35,000 emerging as the next potential upside target. Additionally, continued profit booking in global AI and semiconductor stocks could act as a potential trigger for capital rotation towards Indian IT companies.

Swiggy was one of the biggest losers in this earnings season. Do you see chances of a bounce back in the week ahead?

Swiggy's technical structure remains weak, offering limited recovery potential towards Rs 190. A sustained breakdown below Rs 170 could trigger further downside towards Rs 155.

Swiggy's technical structure remains weak, and the recent price action does not indicate any meaningful improvement in sentiment. The stock faced selling pressure during its recovery attempt near the Rs 190 level, highlighting strong overhead resistance. From a technical perspective, Rs 190 remains a crucial hurdle, and any recovery towards this level could attract selling pressure. On the downside, Rs 170 is an important support, and a sustained close below this level could open the door for further weakness towards Rs 155, based on Fibonacci extension levels. Therefore, even if the stock witnesses a short-term recovery, the upside is likely to remain restricted near Rs 190.

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Acutaas Chemicals shares shot up 28% this week. What does the chart indicate next?

Acutaas Chemicals remains in a structural uptrend, and a sustained breakout above Rs 3,700 could trigger the next rally leg towards Rs 4,350–4,700.

Acutaas Chemicals continues to maintain a structural uptrend, characterised by a higher-high and higher-low formation. After a strong rally, the stock entered a consolidation phase, which appears to be a re-accumulation pattern. Following its latest results, the stock has also registered a breakout above its falling trendline, indicating renewed buying interest. A sustained breakout and successful retest above the Rs 3,700 zone would strengthen the possibility of another leg of the upmove. From a medium-term perspective, the stock has the potential to test Rs 4,350 and subsequently Rs 4,700. Hence, a buy-on-dips strategy can be considered, with Rs 3,700 as the crucial stop-loss reference.

Give us your top ideas of the week

Persistent Systems – BUY

Buy Range: Rs 6,000–6,050

Stop Loss: Rs 5,800

Target: Rs 6,500

The midcap IT space is witnessing improving technical momentum, and Persistent Systems is among the stocks showing a constructive chart structure. The stock has delivered a closing breakout above the neckline of a cup-and-handle formation. It has also reclaimed its 20-day and 50-day moving averages and is sustaining above these levels. Additionally, the daily RSI is in a bullish crossover, indicating improving momentum. The combination of a classical bullish pattern breakout, moving-average reclaim and positive momentum suggests further upside potential towards Rs 6,500.

Eternal – BUY

Buy Range: Rs 340–345

Stop Loss: Rs 329

Target: Rs 365

Eternal has registered a breakout above a corrective falling-channel formation on the daily chart, indicating a potential reversal in its short-term trend. Following the breakout, the stock has reclaimed its short- and medium-term moving averages and is sustaining above them, reflecting improving price strength. The breakout is also supported by volume expansion, which adds credibility to the positive price action. Furthermore, the daily RSI is rising and has entered a bullish crossover, indicating improving momentum. The overall technical setup suggests the possibility of further upside towards Rs 365.