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Below the Weekly Market Analysis by Mr. Ajit Mishra – SVP, Research, Religare Broking Ltd

Markets extended their recovery for the third consecutive week, gaining over 2% amid mixed cues. The sentiment turned positive early on, as weaker-than-expected GDP data raised hopes for RBI intervention, which materialized with a 50-basis-point CRR cut during the policy meet, while the repo rate remained unchanged. Additionally, renewed buying by FIIs, following a prolonged period of selling, further bolstered market confidence. All major sectors contributed to the rally, with realty, metal, IT, and banking emerging as top gainers, while FMCG underperformed. The broader indices also impressed, as both midcap and smallcap indices surged over 4%, surprising market participants. 

With no major events on the horizon, market attention is expected to turn towards macroeconomic indicators like IIP and CPI inflation. The RBI governor highlighted the critical need to manage inflation in his recent speech, suggesting that a potential easing of inflation, coupled with continued sluggishness in GDP growth, could create room for a rate cut in the next policy meeting. Additionally, the trend of FII inflows, following their recent buying spree, will remain a key focal point for market participants.

On the technical front, Nifty has shown impressive recovery over the past three weeks, retracing more than 50% of its correction from the record high of 26,277.95 to the November 21 low of 23,263.15. The index has also reclaimed all key moving averages, establishing a support base around 24,300. A decisive move above 24,800 could further accelerate the recovery, targeting the 25,100-25,300 zone. 

We thus maintain a “buy on dips” strategy, emphasizing selective stock picking. While IT and banking sectors continue to show sustained outperformance, selective contributions from other sectors are crucial to sustaining the current momentum. Additionally, while broader indices remain buoyant, it is important to focus on fundamentally strong stocks in the midcap and smallcap segments, as these counters are also prone to sharp decline during the corrective phase.

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