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Markets Extend Losses Amid Foreign Outflows and Weak Global Sentiment

Market Summary

Markets ended lower for the second consecutive week, weighed down by persistent foreign fund outflows, mixed corporate earnings, and cautious global cues. Despite optimism surrounding progress in India–US trade talks, sentiment remained subdued through the holiday-shortened week. Both benchmark indices declined by over 0.80%, with the Sensex closing at 83,216.28 and the Nifty settling at 25,492.30.

Key Market Drivers

The week’s market tone was shaped by a combination of domestic developments and global trends.

On the domestic front, improved GST collections, a surge in retail sales during the festive season, and encouraging updates on the India–US trade negotiations provided some support. However, mixed quarterly earnings, a sharp decline in India’s exports to the US, and continued FII selling kept overall sentiment under pressure.

Globally, renewed concerns over the valuation of AI-related stocks triggered profit-taking across major markets, further weighing on risk appetite.

Sectoral Snapshot

Sectoral performance remained largely negative, with weakness in Metal, IT, and FMCG dragging the benchmarks lower. In contrast, selective strength was observed in Financials and Banking, which provided partial support.

Among the broader indices, the Midcap index ended flat, while the Smallcap index declined 1.7%, indicating profit booking in the broader space.

Key Events to Watch

The upcoming week will be crucial, with several key macroeconomic data releases scheduled.
On the domestic front, focus will be on India’s CPI inflation and WPI inflation data, which will provide insights into the inflation trajectory and policy outlook.

On the earnings front, quarterly results from prominent companies such as Bajaj Finance, ONGC, Bajaj Finserv, Biocon, Ashok Leyland, Asian Paints, Tata Steel, BPCL, Marico, and Oil India will be closely tracked for sectoral cues.

Globally, traders will monitor the performance of AI-related stocks and developments around global trade deals, both of which are expected to influence market sentiment.

Technical Outlook

* Nifty (25,492.30): The Nifty extended its decline for the second week, slipping below the crucial short-term moving average (20-DEMA) and finding interim support near 25,300. Resistance is now seen around the 25,800–26,100 zone, with a potential retest of record highs if momentum improves. A sustained move below 25,300 could, however, trigger further downside toward 24,900–25,050.

* Bank Nifty (57,876.80): The index outperformed the benchmark, holding firm above its short-term moving average support near 57,400. Its performance will be key to the broader market trend, with a decisive breakout above 58,500 likely to fuel a fresh rally towards 60,000 levels.

* Broader Market: The broader market is expected to witness a mixed trend, with larger midcaps likely to outperform while smallcaps may continue to face selling pressure. Participants should focus on fundamentally strong stocks with consistent earnings momentum and avoid speculative trades.

Strategy Ahead

Markets are likely to remain volatile in the near term amid global uncertainties and a heavy flow of economic and earnings data. While short-term sentiment could stay cautious due to persistent FII outflows and uneven earnings, improving domestic macro indicators and steady corporate performance may provide underlying support.

Traders should maintain a stock-specific approach, focusing on sectors such as banking (especially PSU banks), auto, and select metal counters, which continue to show relative strength. Maintaining a few hedged short positions against long trades may also be prudent, considering recent weakness in select stocks post-earnings. Investors, on the other hand, should continue to focus on earnings quality and realign their portfolios based on company fundamentals and long-term growth prospects.

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