Indian Markets Show Signs of Recovery as Nifty Metal and Healthcare Indices Lead the Way

The streak of upside in Nifty last week has lifted broader market sentiment. Almost all key sectoral indices are trading above their respective 10- and 20-day SMAs, which are at similar positions now. Even those such as Nifty Bank , FMCG, Realty, PSU Bank , and Energy , which are below these SMAs, are within 1% of the same, making them likely candidates for the next sectoral leaders. Among the present leaders, Nifty Media and Auto are the farthest away from this average, with a distance of at least 4%. Meanwhile, the long-short ratio of Foreign Institutional Investors (FIIs) index futures inched up to 11.1, compared with 8.6 last week. Despite the large rise in the indices on Friday, long contracts rose only 1.3%, ending the week with a 12% reduction on a week-on-week basis. Meanwhile, short contracts reduced by 6.2%, consistent with the short-covering theme that persisted throughout last week, leading to a week-on-week decline of 33% in short contracts. This is a very large decline, and we are tempted to believe that this short-covering spree can have more legs, catapulting indices to new peaks. However, it must be noted that short contracts have fallen below 2 lakh contracts for the first time since April 2026, from which point a reversal had unfolded. Also, the simultaneous decline in both long and short contracts signals a move to the sidelines rather than a directional play. Nifty Metal Index is beginning to show early signs of a healthy rebound after finding support near the lower end of a widening wedge pattern. On the weekly chart, MACD histogram exhaustion signals suggest that selling pressure may be losing steam. At the same time, improving volumes point to buyers gradually stepping back in at lower levels, rather than a sharp or impulsive chase. The index is also moving closer to a breakout above its daily Supertrend, which could provide the next meaningful bullish trigger if follow-through buying emerges. The derivatives setup adds further confidence to the recovery theme. Nearly 80% of metal stock futures witnessed either fresh long additions or short covering during the week, reflecting a visible improvement in sentiment across the sector. At the same time, around 70% of the near-OTM put strikes saw a short buildup, indicating that traders are not only expecting stability but are also positioning for any pullback to remain relatively contained. As long as recent swing lows remain intact, Nifty Metal appears well placed to gradually extend its recovery towards 13,100, with 13,400 emerging as the next upside target in the near term. The broader message is that the sector may be moving from a phase of stress to one of cautious accumulation. The Nifty Healthcare Index has resumed its primary uptrend after a brief consolidation phase, breaking out to a fresh all-time high. The weekly chart has formed a strong bullish Marubozu candle, which reflects sustained buying interest and reinforces the strength of the underlying trend. Momentum indicators also remain supportive, with a bullish MACD crossover on the daily timeframe and RSI holding comfortably above 60, suggesting that the move still has momentum on its side. The immediate hurdle is placed around 17,000, and a decisive move above this level could pave the way for an advance towards 17,600-17,800 in the coming weeks. On the downside, 16,600 remains a key support zone and is expected to cushion any short-term pullbacks, keeping the broader structure positive as long as it holds. Sector leadership also remains encouraging, with stocks such as Torrent Pharmaceuticals , Divi’s Laboratories , Mankind Pharma , Laurus Labs , and Apollo Hospitals Enterprise displaying strong technical setups. Their continued outperformance could act as an important catalyst for the index’s next leg higher, especially if broader market conditions remain supportive. The author is Anand James, Chief Market Strategist at Geojit Investments.