He believes the index is making a strong effort to cross the crucial 26,100 level, which he sees as the key breakout point for the next leg higher.
According to Shah, the backdrop has turned more supportive in recent weeks. Global cues from the US have stabilised, the reversal of the AI-driven trade is aiding flows into emerging markets, domestic liquidity remains strong, and FII selling has eased. With GST-related measures likely to strengthen sentiment, a seasonally positive period underway, and earnings holding up well, he feels the market is well-positioned for a confirmed breakout above 26,100.
Beyond the headline index, he sees a larger opportunity in midcaps and smallcaps. The midcap index is already at lifetime highs, while the smallcap index could move towards 20,000 over the next few months.
Shah believes the Bank Nifty is the strongest pillar of the market right now. Banks are crucial because of their heavy weight in the indices, and he pointed out that “if banks don’t do well, our markets go nowhere.”
After spending months under pressure, the Bank Nifty has now broken past the important 58,500 level, which he calls a meaningful positive shift.
He expects the index to move towards 60,000 in the near term and eventually reach 67,000, which means there is still healthy upside left.
He remains most optimistic about PSU banks, saying the top names still have 15–20% potential even from current prices. While private banks will remain stable performers, he does not expect them to deliver anything extraordinary.
Shah has also turned positive on NBFCs and housing finance companies, which he sees benefitting from economic recovery and supportive RBI measures.
However, he is cautious on gold loan companies, calling the recent surge in these stocks a good opportunity to book profits.
He reaffirmed his bullish stance on metals, targeting 12,000 for the NSE Metals Index, which implies another 15% upside. He believes the technical charts are phenomenal, even if the fundamental case is not yet clear to all.
Conversely, Shah remains negative on the IT sector, predicting a multi-month period of underperformance. He also advised profit-booking in gold and gold-financing companies, suggesting the recent rally shows signs of a market top.
For the entire discussion, watch the accompanying video
