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Below the Quote on Weekly Note 31 May 2025 by Mr. Ajit Mishra, SVP - Research, Religare Broking Ltd

Markets Close Lower for Second Consecutive Week AmidMixed Cues

Markets ended the week on a cautious note, marking the second consecutive week of consolidation. This subdued performance came amid ongoing global trade tensions and anticipation surrounding domestic policy developments. The benchmark indices, the Sensex and the Nifty, witnessed notable volatility through the week, eventually closing lower as investors reacted to uncertainties over U.S. tariff developments and awaited the Reserve Bank of India’s (RBI) upcoming monetary policy decision. By the end of the week, the Nifty settled at 24,750.70, while the Sensex closed at 81,451.01.

Key Market Drivers

Despite encouraging domestic cues, mixed signals from global markets kept investor sentiment on edge. Initially, optimism prevailed following the RBI’s record dividend payout and positive updates regarding the monsoon. However, as the week progressed, concerns surrounding rising U.S. bond yields, trade tensions between the U.S. and the European Union, and the ongoing legal battle over U.S. tariffs weighed on market sentiment, limiting the scope for any meaningful recovery.

Sectoral Snapshot

Sectoral performance remained mixed in line with the overall market consolidation. The realty index extended its winning streak for the third consecutive week, while banking and energy sectors also ended in the green. Conversely, FMCG, auto, and metal stocks underperformed and emerged as top laggards. Among the broader markets, both the midcap and smallcap indices managed to register gains of nearly 1.5% each despite the choppy trading environment.

Key Events to Watch

Looking ahead, all eyes will be on the outcome of the RBI’s Monetary Policy Committee (MPC) meeting scheduled for June 6. The central bank’s stance on the rate trajectory, especially amid mixed macroeconomic signals, will be critical in shaping market direction. Additionally, with the new month beginning, participants will track high-frequency data including auto sales numbers and other economic indicators. Updates on the progress of the monsoon and the trend in foreign institutional investor (FII) flows will also be closely monitored.

Globally, developments in the U.S. bond market and any updates regarding ongoing trade negotiations will continue to influence investor sentiment.

Technical Outlook

After spending the last two weeks in a consolidation phase, the Nifty is expected to soon make a directional move. Holding above the 20-day exponential moving average (20-DEMA), currently around 24,600, will be essential to maintain a positive tone. A decisive breach of this level could trigger further profit-booking, dragging the index down toward the 24,200 mark. Conversely, a strong close above 25,200 could rekindle bullish momentum and open the path toward the 25,600+ zone.

We continue to believe that the banking index holds the key to unlocking market momentum. It has been trading within a narrow range for over a month while sustaining above its short-term support at 55,000 (20-DEMA). A breakout above 56,000 could act as a catalyst, propelling the index toward the 57,500 level.

Strategy Ahead

We maintain our constructive view on the markets and recommend looking for buying opportunities unless the Nifty decisively breaks below the 24,600 mark. Within sectors, banking and financial services remain our top picks, while FMCG and IT are expected to trade subdued. With the broader market showing resilience, investors should continue focusing on fundamentally strong stocks that offer a favorable risk-to-reward ratio. Staying agile and informed amid evolving macroeconomic and policy developments will be crucial for navigating the near-term market landscape.

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