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Below the Quote on Weekly Note 20 Dec 2025 by Mr. Ajit Mishra - SVP, Research, Religare Broking Ltd

Market Summary

Markets ended the week with marginal losses as mixed macroeconomic data, a depreciating rupee, and continued uncertainty over the timing of a potential India–US trade deal kept investor sentiment cautious. Selling pressure dominated most sessions; however, a recovery in the final trading day—driven by value buying and renewed interest from foreign portfolio investors (FPIs)—helped limit the downside, though benchmarks failed to close in positive territory. The Nifty declined 0.31% to 25,966, while the Sensex slipped 0.40% to 84,929, indicating a phase of consolidation after recent volatility.

Key Market Drivers

Market direction during the week was shaped by a combination of macro data, currency movement, and global cues. India’s trade deficit narrowed to a five-month low of USD 24.53 billion in November as exports rebounded and imports contracted sharply. On the inflation front, retail inflation inched up to 0.71% in November from a record low of 0.25% in October, but remained well below the RBI’s comfort zone, keeping expectations of policy support intact. Wholesale inflation stayed in negative territory at -0.32%, although the pace of deflation moderated, signalling easing price pressures.

From a flows perspective, FPIs turned selective buyers after initial selling during the first two sessions, providing marginal support even as overall participation remained cautious. The rupee also recovered in the latter part of the week after briefly touching the 91 mark against the dollar, lending some stability to domestic sentiment. Globally, softer US inflation supported risk appetite, while policy divergence—highlighted by the Bank of Japan’s rate hike—kept currency and cross-border fund flow dynamics in focus.

Sectoral Snapshot

Sectoral performance remained mixed, reflecting selective positioning by investors. Information Technology stocks edged higher, supported by favourable global cues and a relatively stable outlook for export-oriented earnings. FMCG stocks also posted modest gains. In contrast, financials, banking, and energy stocks underperformed, weighed down by profit-taking and cautious sentiment amid currency volatility.

In the broader market, both midcap and smallcap indices ended largely unchanged despite intraday volatility, highlighting restrained risk appetite and a continued preference for quality stocks.

Key Events to Watch

The coming week marks the onset of the year-end festive period and will be holiday-shortened due to the Christmas break, which may keep trading volumes subdued. On the domestic front, markets will track infrastructure output data, along with updates on bank loan growth, deposit growth, and foreign exchange reserves. Currency movement and crude oil prices will also remain important variables. Globally, the performance of major markets—particularly the US—will be closely monitored for directional cues.

Technical Outlook

Nifty: The index has reclaimed its short-term moving average, the 20-DEMA, around the 25,950 level. Sustained strength above this zone is essential for a move toward the 26,050–26,200 range, followed by a retest of record highs. On the downside, the previous swing low near 25,700 remains a key support; a breakdown below this level could broaden the consolidation, with the next major support placed around 25,450, coinciding with the 100-DEMA.

Bank Nifty: The index is hovering around its 20-DEMA amid mixed trends within private banking majors. The broader structure remains constructive as long as it holds above the 58,400 support zone. A decisive close above 59,500 is required to trigger a fresh up-move toward the trendline resistance near 60,600; otherwise, consolidation may persist.

Broader Indices: Broader indices have rebounded after testing critical support zones and may attempt to extend the recovery in the coming week, with midcaps appearing relatively better placed than smallcaps.

Strategy Ahead

Given the mixed macro backdrop and ongoing currency-related uncertainties, a cautious yet constructive approach is warranted. Participants may continue to focus on large caps and select large-cap midcaps, while favouring relatively stronger sectors such as private banking, autos, metals, and IT for long positions. Selective opportunities may also emerge in other sectors on a stock-specific basis. Risk management remains crucial in the holiday-shortened week—position sizes should be kept moderate, and a buy-on-dips strategy near key support levels is preferable to chasing momentum.

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