Quote on Weekly Note Jan 03 by Mr. Ajit Mishra - SVP, Research, Religare Broking Ltd
Below the Quote on Weekly Note Jan 03 by Mr. Ajit Mishra – SVP, Research, Religare Broking Ltd
Indian Equities Rally on Strong Macros and Value Buying
Market Summary
Indian equities began the New Year on a strong note, gaining around 1% and decisively breaking out of a five-week consolidation phase. While the start of the week was slightly subdued amid mixed cues, a sharp rebound in the final sessions enabled benchmark indices to close near the week’s highs. The Nifty scaled fresh record levels to settle at 26,328.55, while the Sensex advanced 0.85% to 85,762.01, reflecting renewed risk appetite and improving confidence in the domestic growth outlook.
Key Market Drivers
Market sentiment was supported by robust domestic macro indicators, particularly the sharp rebound in industrial production, which reinforced optimism around economic momentum. However, continued foreign investor selling limited the extent of gains. Fiscal discipline also remained in focus, with the fiscal deficit reaching 62.3% of the full-year target during April–November FY26. Manufacturing PMI eased to 55.0 in December, pointing to some moderation but still indicating healthy expansion.
Globally, markets were largely in a year-end festive mode, with risk sentiment constructive even as currency pressures persisted and the rupee traded near 89.97 against the US dollar.
Sectoral Snapshot
Cyclical and value-oriented sectors led the rally. Metals outperformed sharply, gaining over 5%, supported by optimism around industrial growth and global demand cues. PSU stocks and power counters also witnessed strong buying interest, reflecting expectations of sustained capex momentum and policy support. Banking stocks showed selective outperformance, with the Bank Nifty rising nearly 2%, driven by strength in certain large lenders. In contrast, defensive and export-oriented sectors lagged, with FMCG seeing profit-taking after recent outperformance, while IT stocks underperformed amid a softer outlook for global tech spending and currency-related headwinds.
Key Events to Watch
The coming week is expected to be data-heavy, both domestically and globally, as markets enter the early phase of the earnings season. In India, investors will track the final readings of the HSBC Services PMI and Composite PMI, followed by FY GDP growth data. Bank loan growth, deposit growth, and foreign exchange reserves data will offer insights into credit demand and liquidity conditions.
Globally, key US macro data and releases from China will be closely watched for signals on growth, demand, and inflation trends.
Technical Outlook
Nifty: The Nifty has decisively moved above the 26,200 zone and closed at record highs, confirming the end of the five-week consolidation phase. Immediate support is placed around 26,000, with a stronger base at 25,700. On the upside, a sustained move above 26,300 could pave the way for a rise toward the 26,500–26,700 zone initially, and potentially toward the 27,000 mark.
Bank Nifty: Bank Nifty also outperformed and reclaimed its record highs, reinforcing its relative strength. PSU banks outshone their private peers, partly due to underperformance in heavyweight private banks such as HDFC Bank and ICICI Bank. Immediate support for Bank Nifty is seen at 59,500, with a major support at 58,700, while a breakout above 60,300 could extend the up move toward 61,000 and further to around 61,800.
Broader Indices: Market breadth remained positive, with the midcap index outperforming and touching record highs, while smallcaps posted modest gains, indicating improving participation.
Strategy Ahead
With supportive domestic macro cues and improving earnings visibility, a constructive yet selective approach remains advisable. Investors may continue to favor structurally strong sectors such as banking, metals, autos, and select PSU and capital goods stocks that stand to benefit from the ongoing capex and growth cycle. At the same time, caution is warranted in defensive and export-heavy sectors until clearer global demand signals emerge. Given persistent FII selling and currency sensitivities, traders should manage leverage prudently, accumulate on declines toward key support levels, and avoid chasing momentum at elevated levels.
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