Indian markets are facing significant headwinds as the Nifty struggles to break through the crucial 26,100 resistance level, according to veteran market analyst Vijay L Bhambwani. In his latest weekly analysis, Bhambwani highlights the increasing pressure on bulls who must absorb substantial selling pressure to push the index to new highs.
Mounting Concerns Over Borrowed Money Trading
The most alarming trend identified in Bhambwani's analysis is the record-high borrowing in the margin funding trading (MTF) segment. The total MTF borrowing has surged to an all-time high of ₹1,11,931 crore, spread across 546,59,02,189 shares purchased with borrowed money.
This represents a substantial 13.96% increase in rupee terms and 12.19% rise in the number of shares bought with borrowed funds over just 30 trading sessions. The discrepancy between these percentages indicates price erosion in traded securities as markets have been declining for three consecutive weeks.
Bhambwani expresses serious concerns about this development, noting that traders using borrowed money face dual adversaries - price risk and interest costs. For such leveraged positions to be profitable, security prices need to rise at least twice as much as the interest costs to justify the risk taken.
Key Market Indicators Show Rising Caution
Several critical market indicators point toward increasing investor caution. The NSE advance-decline ratio dropped to 0.80 from the previous week's 1.04, indicating that only 80 stocks gained for every 100 that declined. This ratio must remain above 1.0 with rising prices to signal sustainable upward movement.
Retail risk appetite has contracted sharply, with turnover shifting from higher-risk futures segments to relatively safer index options. Meanwhile, market-wide position limits (MWPL) continue to rise, suggesting that despite the caution, retail traders remain optimistic and are aggressively leveraging long positions.
Bhambwani's proprietary 'impetus' indicator reveals concerning divergences. While the Nifty 50 logged losses, impetus readings rose, indicating selling occurred with higher momentum. Conversely, the Bank Nifty rose but with falling impetus, suggesting the rally was driven more by short covering than aggressive buying.
Political Events and Sector Focus
The analyst highlights the upcoming Bihar election results as a highly sensitive news event that could impact market sentiment. This week's action is expected to polarize around public sector undertakings (PSUs), particularly banks, given their significant weightage in the Nifty 50.
In commodities, oil prices remained under pressure while gas prices rose due to colder weather and storage capacity destruction in Eastern Europe due to the Ukraine war. Bullion witnessed profit-taking, though Bhambwani maintains that patient delivery-based investors looking beyond 2026 can still expect good gains.
Industrial metals saw routine sell-offs after month-end short covering in October, which may lead to profit sales of metal mining company stocks in the near term.
Trading Strategy and Key Levels
Bhambwani recommends a cautious approach, advising investors to avoid leveraging and buy only what they can afford with their own funds. He suggests maintaining light exposure in trade books due to the Bihar election factor and always keeping stop losses and tail risk hedges in place.
For the coming week, the analyst estimates trading ranges between 59,025 - 56,725 for Bank Nifty and 26,000 - 25,000 for Nifty. The 26,104 level remains the key resistance to watch for any sustained rally, while the 25,000 level needs to be defended in case of declines.
Fixed-income investors should keep powder dry in anticipation of better yields in the future. The medium-term outlook remains optimistic as prices stay above the 25-week average, but a fall below this average could open doors to new downsides.
