IGI Logo

Below the Quote on Weekly Note Feb 28 by Mr. Ajit Mishra – SVP, Research, Religare Broking Ltd

Geopolitical Tensions and Technology Weakness Weigh on Markets Despite Strong Domestic Fundamentals

Market Summary

Equity markets ended the week under notable pressure as persistent geopolitical tensions and weakness in technology stocks weighed on sentiment. After an initially positive start, benchmark indices traded lacklustre through the middle of the week. However, a sharp decline in the final session pushed bulls onto the back foot.

Consequently, the Nifty declined 1.54% to settle at 25,178.65, while the Sensex fell 1.84% to close at 81,287.19.

Key Market Drivers

Market sentiment remained fragile throughout the week as investors reacted to rising global uncertainties, including ongoing conflict developments in the region, unresolved US–Iran discussions, and renewed tariff-related rhetoric from the United States. Persistent selling in IT stocks, amid concerns over artificial intelligence-led disruption, further dragged the benchmarks lower.

On the domestic front, macroeconomic indicators continued to present a relatively stable backdrop. Growth in the eight core infrastructure sectors moderated to 4% in January compared with 5.1% a year earlier, indicating a slight cooling in infrastructure momentum.

At the same time, policy and structural developments remained constructive. India and Brazil signed a memorandum of understanding to strengthen MSME collaboration and expand access to green finance. Meanwhile, the RBI noted that the revised CPI series with a 2024 base year would better reflect household consumption patterns and reduce volatility in inflation measurement.

Economic growth expectations remain robust. India’s economy is likely to expand around 8.1% in Q3 FY26 under the revised series. Corporate earnings outlook also remains encouraging, with estimates suggesting Indian companies could deliver 8–10% year-on-year revenue growth in Q4 FY26, supported by resilient rural demand and a gradual recovery in urban consumption.

Foreign flows remained volatile during the week. FIIs ended as net sellers, while DIIs continued to provide support, recording net inflows of approximately ?24,300 crore.

Sectoral Snapshot

Sectoral performance was mixed but largely tilted to the downside. Realty and IT stocks led the decline, reflecting global risk aversion and sector-specific concerns surrounding AI-driven disruption. FMCG stocks also witnessed weakness, while banking and financial stocks saw profit booking.

On the positive side, selective defensive and commodity-linked sectors demonstrated resilience. Metal stocks gained on the back of firm global commodity trends, while oil & gas and healthcare stocks posted gains. This divergence highlights ongoing sector rotation as investors shift toward segments with relatively stable earnings visibility amid global uncertainty.

Broader market participation remained subdued. The Nifty Midcap 100 index slipped moderately, indicating a cautious approach among investors despite pockets of strength in select themes.

Key Events to Watch

The coming week marks the beginning of a new month and is expected to be data-heavy, which could influence near-term market direction.

On the domestic front, auto stocks will remain in focus as companies announce their monthly sales numbers. Investors will also track the HSBC Manufacturing PMI, Industrial Production data, and the HSBC Composite PMI Final.

Global cues will remain equally important. The performance of global markets, particularly the US, amid lingering tensions between the US and Iran and trade-related developments, will be closely monitored. Developments related to artificial intelligence and their potential business impact will also remain on investors’ radar.

Technical Outlook

Nifty: The index has surrendered the support zone of 25,400 and moved closer to the gap area around 25,100. It will be important to observe how relatively stronger sectors, especially banking, perform in the coming sessions. Their performance could determine whether the market stages a rebound or extends the decline toward the 24,800 zone.

On the upside, 25,600 will act as an immediate and strong hurdle. A decisive move above this level could negate the prevailing pessimism and pave the way for a recovery toward 25,900.

Bank Nifty: The banking index declined modestly and closed at 60,529, reflecting relative resilience compared with the broader market. Its performance will remain crucial in the coming sessions.

Immediate support is placed around 59,800, followed by a stronger base near 59,000. Resistance is seen around the 61,000 zone, and a decisive breakout above this level could trigger renewed upward momentum and potentially lead the index to retest its record-high zone near 61,700.

Broader Indices: Trends remain mixed in the broader market, with both midcap and smallcap segments facing mild pressure and ending marginally lower. We continue to prefer midcap stocks due to their relative outperformance and recommend selective participation within the smallcap space.

Strategy Ahead

Given persistent geopolitical risks and sector-specific volatility, a cautious and selective investment approach is advisable. Participants should focus on fundamentally strong large-cap companies and sectors with relatively stable earnings visibility such as banking, healthcare, metals, pharma, and energy.

Exposure to export-oriented IT stocks may remain volatile in the near term amid ongoing concerns about technological disruption and global demand uncertainty. Realty and FMCG sectors may also continue to trade lacklustre.

Traders are advised to maintain disciplined risk management, avoid aggressive leverage, and wait for clearer signs of stability before increasing exposure.

Above views are of the author and not of the website kindly read disclaimer