CLSA sees no near-term breakout for Nifty, prefers midcaps on dips

Laurence Balanco of CLSA said the Nifty continues to struggle with weak momentum, leaving the benchmark index trapped within a broad trading range that has persisted for nearly two years.

He identified the lower end of the range at 22,000–22,300 and the upper end at 26,000–26,300, while noting that the gap created on April 8 provides near-term support around 23,200.

Balanco said, “In the near term we are not expecting any imminent breakout and there is short term risk to trade towards that bottom end around the 22,300 - that's the level that we would look to bottom fish at, but right now there is just a lack of momentum when we look at the headline index.”

Laurence Balanco said the midcap segment remains one of CLSA’s preferred areas within the Indian market. He noted that the Nifty Midcap index had been consolidating since its 2024 highs before breaking above the upper end of its trading range, a move that strengthened its technical outlook.

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According to him, midcaps are well-positioned to continue leading the broader market, with the breakout from the 2024-26 range implying potential upside of around 30%. He added that market pullbacks should be viewed as opportunities to increase exposure to the segment, as the leadership trend remains intact and is likely to continue through the rest of the year.

CLSA sees further upside potential in the midcap segment and recommends using market pullbacks as opportunities to increase exposure. Among individual ideas, Balanco highlighted cable and wire players KEI Industries and BSE, while also favouring exchange operators MCX and MCX on declines.

While small-cap stocks have outperformed since the March lows, Balanco believes they have not yet delivered the same convincing breakout seen in midcaps. As a result, CLSA continues to prefer midcaps over both smallcaps and largecaps, citing stronger technical trends and more favourable risk-reward dynamics.

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For commodities, Balanco expects Brent crude to remain within a broad trading band. While geopolitical developments continue to influence short-term moves, he believes oil prices have become less important for risk assets than bond market movements in recent months.

He identified the $90-per-barrel level as an important support zone to watch, saying a break below that level could signal further easing of geopolitical risks in the Middle East.

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