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Below the Weekly Note 13th December 2025 by Mr. Ajit Mishra, SVP - Research, Religare Broking Ltd

Rupee Weakness and FII Outflows Keep Markets Under Pressure Despite Global Support

Market Summary

Markets remained volatile and ended the week in negative territory amid mixed domestic and global cues. Sentiment stayed subdued through most of the week and weakened further as selling pressure intensified, though a late rebound in the final sessions helped limit the downside. Persistent foreign fund outflows and a sharp depreciation in the rupee weighed heavily on investor confidence. As a result, the Nifty slipped 139 points to close at 26,046, while the Sensex declined 445 points to end at 85,268.

Key Market Drivers

Market action during the week was driven largely by macroeconomic developments and shifting global cues. On the domestic front, the rupee touched a fresh record low of 90.56 against the US dollar, significantly dampening risk appetite. However, some relief emerged after the US Federal Reserve announced a 25 bps rate cut, while optimism around progress in India–US trade discussions helped arrest further declines. Auto retail volumes remained resilient, with November registrations rising 2% year-on-year across passenger vehicles, three-wheelers, commercial vehicles, and tractors. Additionally, disclosures related to public sector banks writing off Rs.6.15 lakh crore of loans over the past five-and-a-half years kept the financial sector in focus.

Foreign Institutional Investors continued their selling streak, extending pressure on domestic equities, while consistent buying by Domestic Institutional Investors provided partial support and helped cushion sharper declines.

Sectoral Snapshot

Sectoral performance largely mirrored the benchmark indices, with most sectors closing in the red. Metals outperformed, supported by expectations of improved global demand and firm commodity prices, while power and oil & gas posted modest gains. On the downside, FMCG, IT, and realty emerged as the key laggards, reflecting profit-taking, sector-specific headwinds, and a cautious global investment environment. Broader markets witnessed volatile swings and ended the week lower by nearly 0.5%, underscoring selective risk appetite.

Key Events to Watch

The coming week features an active domestic data calendar, with the release of India’s Wholesale Price Index (WPI) inflation and trade balance figures. Flash readings of the HSBC Composite, Manufacturing, and Services PMI will also be closely tracked for early signals on economic momentum heading into year-end. Developments related to India–US trade discussions will remain in focus, while globally, the performance and macro cues from US markets are expected to influence near-term sentiment.

Technical Outlook

Nifty: The index has managed to reclaim the crucial short-term moving average (20 DEMA) near the 25,950 zone. Sustained holding above this level will be critical for extending the recovery toward the record high of 26,300, with further upside potential toward 26,550. Failure to maintain this support could lead to a retest of the previous swing low near 25,700, followed by the major support around 25,400, which coincides with the 100 DEMA.

Bank Nifty: The banking index continues to display relative strength and is holding above its short-term moving average. The 58,400–58,800 zone remains a key support area, and a breakdown below this could trigger fresh pressure toward 57,600. On the upside, the 60,000–60,500 zone is the immediate resistance, and a decisive breakout could pave the way for renewed momentum.

Broader Market: Market breadth remains fragile, with midcaps holding up relatively better while smallcaps continue to show signs of distribution amid valuation concerns. While a short-term rebound is possible, participation is likely to remain selective.

Strategy Ahead

Participants should stay selective and maintain a balanced approach amid ongoing currency volatility and mixed global cues. Large-cap exposure remains preferable, particularly in sectors such as private banking, automobiles, metals, and pharmaceuticals. Export-oriented stocks may continue to benefit from a weaker rupee, though IT could remain range-bound given correction in the US IT-heavy index, Nasdaq Composite. Caution is advised in mid and small caps as valuations remain elevated and liquidity support has moderated. Besides, traders should avoid chasing stocks facing negative news flow in anticipation of a rebound and wait for clear signs of stability before taking fresh exposure.

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