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Below the Quote on Weekly Note Aug 23 by Mr. Ajit Mishra – SVP, Research, Religare Broking Ltd

GST Optimism Lifts Markets; Focus Turns to Data-Heavy Week

Markets ended higher for the second consecutive week, with benchmark indices Nifty 50 and Sensex advancing nearly a percent. Sentiment was buoyed by optimism around a GST rate overhaul from the outset and strengthened as the week progressed, though profit booking in the final session trimmed some gains. By the week’s close, the Nifty and Sensex settled at 24,870.10 and 81,306.85, respectively.

Key Market Drivers

The gains were driven largely by domestic policy cues, as expectations around the GST rate changes supported risk appetite. Adding to the positive tone, S&P’s upgrade of India’s sovereign credit rating further bolstered sentiment. However, the cautious undertone persisted due to mixed geopolitical developments and uncertainty over policy rates ahead of US Federal Reserve Chair Jerome Powell’s address at Jackson Hole, which triggered profit-taking.

Sectoral Snapshot

Most sectors traded with a positive bias, with autos, realty, and FMCG among the top performers. Consumption-oriented segments likely benefited from sentiment around GST reforms, though the moves remained rotational rather than broad-based. On the other hand, weakness in banking and financials capped overall momentum. Broader indices also moved higher, gaining around 2% each, in line with the positive market tone.

Key Events to Watch

In the coming week, investors will monitor domestic data releases closely, including the HSBC Manufacturing, Services, and Composite PMIs, along with the key IIP and GDP prints, which will serve as critical indicators of economic momentum. On the global front, geopolitical developments and the market reaction to any dovish undertone from the US Fed Chair’s Jackson Hole remarks will remain key triggers.

Technical Outlook

Technically, the Nifty has approached the support zone of its short-term moving average, with the 20-DEMA placed around 24,800. Sustaining above this level could open the door for a move towards 25,250 initially, followed by 25,400. In case of a decline, it may fill the gap around retest the immediate support near 24,600, with a stronger base around 24,350.

The Bank Nifty continues to underperform and is hovering near a critical support zone defined by its medium-term moving average, the 100-DEMA, around 54,900. Its ability to hold this level will be crucial in determining market momentum; otherwise, the pace of gains may remain gradual. On the upside, resistance is expected around 56,200–56,700, while a breakdown below 54,900 could drag the index toward 54,000. Market breadth remains steady but selective, with participation likely to fluctuate around upcoming data releases.

Strategy Ahead

Given this backdrop, maintaining a measured long bias is prudent, with staggered buying on dips in quality names where earnings visibility remains strong. Defensive sectors such as pharmaceuticals and select consumption-driven value chains could serve as stabilizers, while policy beneficiaries from the GST overhaul in consumption ecosystems may continue to provide opportunities.

Investors and traders should manage event risks carefully, trimming leveraged positions ahead of key domestic and global data and redeploying selectively as volatility eases. Tight stop-losses around recent swing levels are advisable, especially given the current underperformance in banking and IT sectors.

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