IGI Logo

Below the Quote on Weekly Note Jan 17 by Mr. Ajit Mishra - SVP, Research, Religare Broking Ltd

Consolidation with Cautious Bias Amid Tariff Overhang and Persistent FII Selling

Market Summary

Markets largely consolidated during the week amid mixed cues and ended almost unchanged. After a volatile start, benchmark indices remained range-bound in the subsequent sessions. The Nifty and Sensex finally settled at 25,694.35 and 83,570.35, respectively. Broader indices moved largely in line with the benchmarks and ended with modest gains.

Key Market Drivers

Optimism from better-than-expected Q3 earnings by select large-cap IT companies was offset by tariff-related uncertainties, geopolitical tensions, and continued foreign fund outflows. Domestic macro data remained mixed, with rising retail and wholesale inflation weighing on overall sentiment. From a flows perspective, FIIs remained net sellers, extending their recent selling trend.

Sectoral Snapshot

Sectoral performance remained mixed, reflecting selective investor positioning. Metals and IT emerged as the key outperformers, with the Nifty Metal index rising 4.41% and the IT index gaining 2.75%, supported by stronger earnings visibility and relative resilience to tariff concerns. PSU stocks also witnessed steady buying interest.

On the other hand, Realty, Pharma, and Auto were the major laggards, declining between 1.74% and 2.44%, as investors reduced exposure to rate-sensitive and high-beta segments amid the onset of the earnings season.

Key Events to Watch

The upcoming week is expected to be data-heavy and crucial for short-term market direction. Participants will initially react to the earnings of key heavyweights such as Reliance Industries, HDFC Bank, and ICICI Bank. Thereafter, focus will shift to the broader set of Q3 earnings from several large and mid-cap companies across sectors. Key domestic releases include PMI readings for Manufacturing, Services, and Composite. In addition, data on bank loan growth, deposit growth, and foreign exchange reserves will be closely monitored.

On the global front, US macroeconomic data, including GDP growth, inflation trends, jobless claims, and PMI readings, will influence risk sentiment and currency movement. Geopolitical developments and updates on trade negotiations will also remain on investors’ radar.

Technical Outlook

Nifty: The Nifty continues to hover near its medium-term moving average, the 100 DEMA, indicating a tussle between bulls and bears. A decisive break below this level could trigger further downside toward 25,300, followed by the key long-term support near the 200 DEMA at 25,150. On the upside, any rebound is likely to face resistance in the 25,900–26,000 zone, with the next hurdle around 26,200.

Bank Nifty: The Bank Nifty continues to exhibit relative strength and is holding comfortably above its short-term moving average, the 20 DEMA. The prevailing outperformance is likely to continue, with immediate support at 59,200 and a stronger cushion at 58,700. On the higher side, the 60,500–61,200 zone remains the key target range.

Broader Indices: The broader market is expected to remain in a consolidation phase, with a preference for midcap stocks over smallcaps based on their relative performance.

Strategy Ahead

Given the mixed domestic and global backdrop and persistent foreign fund outflows, it is essential to manage leverage and position sizes prudently. A decisive break from the prevailing consolidation range in the Nifty index would offer cues for the next directional move. Meanwhile, participants should focus on quality large-cap and larger midcap stocks, particularly in sectors with stronger earnings visibility and institutional interest, such as IT, Metals, and select PSU names. Exposure to rate-sensitive sectors like Realty and Capital Goods should remain limited.

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