Indian Stock Markets Set For A Capex-Driven Rally in May - Here’s What You Need to Know

Despite a shortened 16-session series riddled with sharp volatility, the Nifty Futures staged a stunning recovery of nearly 2,400 points from April lows, closing the month up 2.50% at 24,246.70.

"The April series was marked by heightened volatility...yet Nifty Futures showed strong resilience," said Sudeep Shah, Deputy Vice President and Head of Technical & Derivatives Research at SBI Securities.

Rollovers also improved month-on-month. Nifty Futures rollover climbed to 79.08% from 76.09% last month, albeit marginally lower than the three-month average of 79.58%. The number of shares rolled declined to 128 lakhs from 140 lakhs previously, but encouragingly, rollover costs eased to 0.53% against a three-month average of 0.64%.

Bank Nifty, traditionally a capex-heavy sector benchmark, led the surge, rallying over 5,800 points from the lows to post a 6.59% gain. However, Bank Nifty rollovers dipped to 75.05%, compared to 76.98% last month.

Shah also highlighted that the India VIX, a barometer of market volatility, declined sharply by over 30% from its recent peak of 23.18, suggesting a stabilizing market environment ahead.

Capex-Focused Sectors Poised for Outperformance
A major highlight from the rollover analysis was the identification of potential outperformers, heavily tilted towards capex-intensive sectors.

According to Shah, "Potential Outperforming Sectors based on Roll-Over Data include Private Banks, Financial Services, PSU Banks, Cement, Chemical, Capital Market, Defense, Automobile, Pharma, Healthcare and Oil & Gas."

These sectors traditionally absorb and deploy significant capital expenditures, especially in the early quarters of a fiscal year. The report suggests that active derivative rollovers in these sectors signal institutional investors' confidence in India’s ongoing private capex revival.

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Private banks and PSU banks, key financiers for India's infrastructure and industrial expansion, showed strong rollover trends, with stocks like AU Bank  (rollover at 91.06%), Indusind Bank (86.94%), and IDFC Frist Bank (94.87%) topping the banking pack.

Similarly, the cement sector, a direct beneficiary of infrastructure spends, witnessed robust rollovers, with Grasim (96.56%) and Dalmia bharat (92.82%) leading the way. In defense and capital markets, HAL (93.57%) and BSE (82.78%) showed notable performance, as per Shah.

FIIs Turn Bullish, May Historically Strong
A bullish shift among Foreign Institutional Investors (FIIs) is another positive undertone for capex allocation plays. The FII long-short ratio surged sharply to 40.86% in the April rollover, reflecting a strong bias towards long positions heading into May.

Historically, May has also been a favorable month.

Shah noted that, "Over the past 17 years, May has often exhibited a positive trend for Nifty, closing on a positive note 10 times with an average gain of 4.66%."

Bank Nifty, too, mirrored this seasonality, closing positively in 11 out of 17 occasions, with an average gain of 7.52%.

Key Support and Resistance Levels for Nifty and Bank Nifty
Technically, the Nifty index now faces immediate support at the 24,000-24,050 zone.

"As long as the index is trading above 24,000, it is likely to continue its upward journey and test 24,550, followed by 24,700 in the short term," said Shah.

For Bank Nifty, immediate resistance is pegged at the 56,000-56,100 zone. Sustaining above these levels could propel it towards 56,800 and 57,500 levels.
Meanwhile, on the downside, support zones are seen at 23,750-23,780 for Nifty and 54,400-54,500 for Bank Nifty.

Sectoral Divergence: Metals and Realty May Lag
On the flip side, the report cautioned that Metal and Realty sectors might underperform. 
Stocks like Vedanta ( -11.20% price change) and Tata Steel ( -9.15% price change) were among the top laggards of the April series.

Realty stocks, despite some positive returns like HUDCO (14.61%), showed weaker rollover stability, suggesting caution, accoridng to the SBI Secuutires report. 

This underperformance is attributed to subdued global commodity demand and valuations that already price in a robust realty cycle, limiting further upside.

Capex Allocation in Focus for May
As India embarks on a new fiscal quarter, SBI Securities’ derivative data strongly points toward a continuation of momentum in capex-driven sectors. Easing volatility, strong FII participation, and historically favorable May seasonality combine to create a fertile ground for companies and investors focused on India's capex boom.
 

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