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Below the Quote on Weekly Market Outlook from Mr. Ajit Mishra, SVP – Research, Religare Broking

Market Summary

Markets snapped an eight-week losing streak, posting modest weekly gains as easing crude oil prices and positive corporate updates supported a late-week recovery. However, volatility remained elevated following the RBI’s decision to raise the repo rate by 25 basis points to 5.50% and shift its policy stance towards calibrated tightening.

The Sensex gained 0.78% to close at 72,472.33, while the Nifty advanced 0.44% to settle at 22,520.45.

Key Market Drivers

The RBI’s policy decision was the key domestic trigger. While the 25-basis-point rate hike was broadly in line with expectations, the shift from a neutral stance to calibrated tightening raised concerns about borrowing costs and the possibility of further policy action. However, the upward revision in the FY27 GDP growth forecast reinforced confidence in the resilience of the domestic economy.

Global cues continued to influence market sentiment. Elevated US Treasury yields, uncertainty surrounding the Federal Reserve’s policy trajectory and geopolitical risks kept investors cautious. Crude oil prices remained a key variable, given their implications for India’s import bill, inflation, corporate margins and the rupee. Persistent FII selling further weighed on sentiment.

Sectoral Snapshot

Sectoral performance remained sensitive to crude oil movements, interest-rate expectations and company-specific developments. FMCG, banking and financial stocks witnessed a decent recovery, while realty, metals and auto stocks continued to face pressure.

Key Events to Watch

Investors will track September CPI and WPI inflation data for cues on price pressures following the RBI’s recent rate hike and shift towards calibrated tightening. The Q2 FY27 earnings season will also gather momentum, with HCL Technologies, Hero MotoCorp, Tech Mahindra, Wipro and Nestle India scheduled to announce results. Corporate guidance and commentary on demand and margins will be key to assessing the earnings outlook.

FII flows and rupee movements will also be closely monitored, as persistent foreign selling and currency weakness could limit the sustainability of the recent market recovery.

On the global front, US CPI, core inflation, PPI and retail sales data will shape expectations around the Federal Reserve’s policy trajectory. Movements in US Treasury yields, crude oil prices and geopolitical developments will remain important drivers of risk appetite.

Technical Outlook

Nifty

The Nifty gained 0.44% to close at 22,520.45, ending its eight-week losing streak. However, the sharp midweek sell-off followed by a rebound highlights the persistence of volatility. A durable reversal will require sustained buying interest and an improvement in market breadth rather than a single-session recovery.

We believe the 22,200–22,400 zone is a crucial support area to monitor. Sustaining above this region could support a recovery towards 23,000–23,300. Conversely, a decisive breakdown below this support zone could trigger renewed weakness towards 21,700–22,000.

Bank Nifty

Bank Nifty remains sensitive to the RBI’s tightening stance, borrowing costs and movements in global bond yields. Quarterly business updates and earnings reactions will also influence its next directional move.

For the recovery to gain traction, the index needs to decisively surpass the 55,800 hurdle, which could open the way towards the moving-average ribbon resistance near 56,600. On the downside, 53,800 is the first key support, followed by 52,700. Until the index clears its immediate resistance levels, a selective and cautious approach remains advisable.

Market Breadth

The end of the eight-week losing streak is encouraging, but the modest weekly advance does not yet signal a broad-based recovery. Sharp reversals following the RBI’s policy announcement highlight the market’s vulnerability to macroeconomic surprises.

The divergence between resilient domestic growth and subdued investor sentiment remains central to the current market setup. A sustained improvement in market breadth, stabilisation in foreign flows and moderation in crude oil prices would provide stronger evidence of a trend reversal.

We recommend maintaining extra caution in the midcap and smallcap segments, where elevated valuations and earnings-related disappointments could trigger sharp corrections.

Strategy Ahead

The eight-week losing streak has ended, but the broader correction may not be over. A sustainable recovery will depend on improving market breadth, stable crude oil prices and stronger follow-through buying.

The coming week will be important in determining whether the recent rebound can extend beyond short-covering and selective buying. Inflation data, corporate earnings, crude oil movements and foreign fund flows will remain key market drivers. While India’s growth outlook continues to provide support, elevated global yields and energy-related risks remain challenges for valuations and investor confidence.

Traders should remain selective, avoid excessive leverage and adhere to disciplined risk management. Investors should prioritise companies with resilient earnings, strong balance sheets and pricing power, while considering staggered accumulation at appropriate valuations.

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