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Below the Quote on Weekly Note 05 July 2025 by Mr. Ajit Mishra, SVP - Research, Religare Broking Ltd

Markets End Lower Amid Trade Uncertainty; All Eyes on Global Cues and Earnings Season

Markets witnessed a mild pullback after an initial surge post-breakout, losing over half a percent during the week. Uncertainty surrounding trade negotiations ahead of the July 9 deadline kept risk appetite in check from the outset. However, updates suggesting a possible deal announcement between the U.S. and India helped limit the downside. Eventually, the benchmark indices—Nifty and Sensex—settled lower at 25,461.00 and 83,432.89, respectively.

Key Market Drivers

The decline was primarily driven by profit-taking, as investors adopted a cautious stance ahead of key global trade events. Concerns around potential U.S. trade retaliation created doubts about the timely finalization of trade agreements with major economies, including India. However, the downside remained limited following reports of a likely interim deal between India and the U.S. ahead of the scheduled deadline

On the domestic front, macroeconomic data presented a mixed picture. Industrial output growth slowed to a nine-month low of 1.2% in May, owing to weaker performances in manufacturing, mining, and electricity. In contrast, June’s indicators were more upbeat—manufacturing PMI surged to a 14-month high of 58.4, and services PMI reached a 10-month high of 60.4, reflecting healthy demand conditions.

India’s fiscal position continued to show strength, with the deficit narrowing to just 0.8% of the annual target, thanks to a substantial Rs.2.69 lakh crore dividend transfer from the RBI. GST collections also held firm, recording a 6.2% YoY increase to over
Rs.1.84 lakh crore in June.

Sectoral Snapshot

The market trend remained mixed across sectors. IT and healthcare stocks outperformed, buoyed by defensive positioning and stock-specific developments. Conversely, rate-sensitive sectors such as realty, banking, and auto witnessed selling pressure due to profit booking, while FMCG also edged lower.

Broader markets fared better than the benchmark indices, with the midcap and smallcap indices rising in the range of 0.3% to 0.5%, signaling continued investor interest in select non-index stocks.

Key Events to Watch

The coming week holds significant importance not only for Indian markets but for global equities as well. The most anticipated event is the outcome of the U.S. trade deadline on July 9, which could shape global trade dynamics. Investors will also closely monitor the release of the U.S. Federal Reserve’s FOMC minutes on the same day.

Domestically, the spotlight will shift to corporate earnings, with IT major TCS and retail giant Avenue Supermarts among the prominent companies scheduled to report their quarterly results, setting the tone for the Q1 earnings season.

Technical Outlook

After a brief breakout in the previous week, the Nifty has reverted to its consolidation phase, ending marginally lower. A decisive move beyond the gap area—i.e., the 25,650–25,750 zone—will be required to resume the uptrend toward fresh all-time highs. On the downside, the 20-day exponential moving average (DEMA) around 25,200, which coincides with the upper boundary of the earlier consolidation range, will serve as the first key support, followed by the 24,800 level.

The banking index continues to trend upward, albeit gradually. However, a mixed performance among private sector heavyweights such as HDFC Bank, ICICI Bank, Kotak Bank, and Axis Bank is limiting momentum. On the contrary, PSU banks remain strong and are showing trend consistency. We expect the index to maintain its current trajectory and move toward the 57,600–58,400 zone. In case of a dip, immediate support lies at the 20 DEMA (~56,500), with stronger support near 55,500.

Strategy Ahead       

Given the fluid global environment—especially concerning U.S. trade policy—investors should prepare for continued volatility. Nonetheless, we maintain a positive outlook and recommend a stock-specific approach, with a focus on earnings quality and relative strength as the Q1 earnings season progresses

While most key sectors, except FMCG, are witnessing rotational participation, IT could deliver a positive surprise if earnings meet expectations. Additionally, the pharma and energy sectors may see renewed buying interest. Broader markets continue to attract flows; however, selective caution is advised due to overbought conditions in certain segments..

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