Nifty Tanks 2.5%, Reversal Fears Rise; Top Stock Buys Revealed
Overview
Nifty dropped 2.5% last week, breaking critical support and confirming a bearish technical pattern. Broader indices also weakened significantly. SBI Securities analyst Sudeep Shah advises caution but highlights Alkem Laboratories and MTAR Technologies as top stock picks.
Stocks Mentioned
Nifty Faces Technical Breakdown
The Nifty index concluded the week starting January 12, 2026, with a sharp 2.5% decline, marking its most significant weekly fall since September 2025. The optimism seen at the start of the week, which propelled Nifty to a fresh all-time high, proved unsustainable. Selling pressure was evident daily, with gap-down openings throughout the final four sessions.
Technically, the damage is significant. Nifty has confirmed a neckline breakdown of an Adam & Adam Double Top pattern, a bearish reversal signal that alters the near-term risk profile. The index has also decisively breached its 20-day and 50-day Exponential Moving Averages (EMAs). The 50-day EMA, a crucial support level since October 2025, finally gave way. Prices are now testing the 100-day EMA, while momentum indicators have weakened considerably. The daily Relative Strength Index (RSI) fell below 40 for the first time since September 2025, suggesting further downside could be imminent.
Immediate support for the Nifty is identified in the 25,500–25,450 zone. A sustained move below 25,450 could trigger a decline towards 25,200. Upside attempts are expected to face strong resistance between 25,900–25,950, making a rebound technically challenging.
Bank Nifty Shows Relative Strength, But Caution Advised
The Bank Nifty benchmark outperformed the broader market, closing down approximately 1.5%. Despite this relative strength, the weekly chart has flashed a warning sign with the formation of a Dark Cloud Cover candlestick pattern, indicating a potential shift from bullish dominance to emerging bearish pressure.
The short-term technical setup shows weakness, with the Bank Nifty slipping below its 20-day EMA. Momentum indicators are steadily losing strength, and the daily RSI has crossed below its 9-day average. The fast stochastic has also dipped below the slow stochastic line, capping immediate upside potential. Key support lies in the 58,700–58,600 area, coinciding with recent swing lows. A break below 58,600 could lead to declines towards 58,000 and 57,500. Resistance is expected around 59,700–59,800.
Top Stock Recommendations from SBI Securities
Sudeep Shah, Head - Technical Research and Derivatives at SBI Securities, has identified Alkem Laboratories Ltd and MTAR Technologies Ltd as top stock picks. These recommendations come amid a cautious market outlook. Broader market indices like the Nifty Midcap 100 and Smallcap 100 are also showing stress, trading below key moving averages, signaling a need for a selective approach.
Alkem Laboratories Ltd (ALKEM) has confirmed a breakout from a downward-sloping trendline, followed by strong upward price action. The RSI has rebounded sharply, indicating strengthening bullish momentum. The Average Directional Index (ADX) is rising, suggesting a gaining uptrend, and MACD histograms are expanding. SBI Securities recommends accumulating Alkem in the ₹5,800-₹5,790 zone with a stop-loss at ₹5,620, targeting ₹6,200.
MTAR Technologies Ltd (MTARTECH) has consistently found support at its 50-day EMA. The stock recently rallied nearly 7% on increased volumes, surpassing its previous swing high. The RSI is trending upward, just below 70, indicating strengthening momentum, while the MACD line has crossed above the zero line with expanding histogram bars. The recommendation is to accumulate MTAR Technologies in the ₹2,690-₹2,680 zone, with a stop-loss at ₹2,605 and a target of ₹2,875.
