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Below the Quote on Weekly Note by Mr. Ajit Mishra – SVP, Research, Religare Broking Ltd

Markets Rebound Sharply, Nifty and Sensex End Higher

After three consecutive weeks of losses, markets made a strong comeback, closing the week with gains of nearly 2%. The recovery was driven by favorable global and domestic cues, instilling confidence among investors. The Nifty settled at 22,552.50, while the Sensex closed at 74,332.58, marking a significant rebound.

Key Market Drivers

The global sentiment improved following reports of a delay in U.S. tariffs and the possibility of further negotiations, which helped stabilize financial markets. Additionally, a weaker dollar and a decline in crude oil prices further boosted investor confidence.

On the domestic front, the Reserve Bank of India’s (RBI) decision to infuse additional liquidity into the system added to the positive momentum. The combination of these factors led to a broad-based rally across sectors, with metal, energy, and pharmaceutical stocks emerging as the top gainers. The broader indices also posted impressive gains, rising between 2.6% and 5.5%.

Key Data and Events to Watch

The upcoming trading week will be a holiday-shortened one, with market participants closely monitoring global developments in the absence of major domestic events. Key factors to watch include fresh updates on tariff negotiations, geopolitical tensions, and their impact on the movement of the U.S. dollar and crude oil prices.

Foreign Institutional Investors (FIIs) have slowed their selling in cash markets, but any shift in their stance will remain a crucial indicator for market direction. On the macroeconomic front, the release of the Index of Industrial Production (IIP) and Consumer Price Index (CPI) inflation data will also be closely tracked.

Technical Outlook

From a technical perspective, Nifty faces a crucial hurdle at its 20-day Exponential Moving Average (DEMA) near 22,700. A sustained move above this level, supported by banking stocks, could push the index towards the 23,200-23,400 range. However, a close below 22,250 may stall the recovery and lead to a retest of the key support zone between 21,800 and 22,000.

Similarly, in the banking sector, a decisive breakout above 49,000 on the Bank Nifty—its 20 DEMA—could provide the necessary momentum to propel the index toward the 50,000 mark.

Strategy

Given the prevailing scenario, investors are advised to maintain a positive yet cautious approach. Stock selection should focus on companies demonstrating relative strength and strong upside potential. The broader indices have approached their initial resistance levels, making it prudent to limit aggressive positions and avoid adding to loss-making trades at this juncture. With key global and domestic events lined up, market volatility is expected to persist. Investors should stay vigilant, track crucial data points, and make informed decisions based on emerging trends.

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