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

Markets End Week on a Cautious Note Amid Global Uncertainties

Markets concluded the week on a subdued note, as investors grappled with global uncertainties and awaited key domestic developments. The benchmark indices experienced volatility, with the Sensex and Nifty oscillating within a narrow range before closing marginally lower. The Nifty settled at 24,853.15, while the Sensex ended at 81,721.08, reflecting cautious investor sentiment.

Key Market Drivers

The market's muted performance was driven by a combination of global and domestic factors. On the global front, rising U.S. bond yields and concerns over the United States' mounting debt burden triggered foreign portfolio outflows, putting pressure on emerging markets, including India. Additionally, speculation around favorable developments in the U.S.-China trade deal raised concerns about potential capital outflows or reduced inflows into Indian markets, further denting sentiment.

On the domestic front, mixed corporate earnings and delays in finalizing the India-U.S. trade agreement added to the uncertainty, prompting profit-booking and a guarded stance among market participants.

Sectoral Snapshot

The week saw a mixed sectoral performance. Realty and metal sectors remained top performers for the second consecutive week, while auto, IT, and FMCG sectors edged lower. Among broader indices, the smallcap segment managed to gain nearly half a percent, whereas the midcap index ended with marginal losses. On the thematic front, select stocks in the defense space continued to attract buying interest.

Key Events to Watch

In the week ahead, market participants will first react to the RBI’s record dividend transfer of ?2.7 lakh crore to the government and its implications for fiscal policy. Additionally, the release of India’s industrial and manufacturing production data for April, scheduled for May 28, along with the Q1 GDP growth figures, will offer insights into the economic recovery trajectory. Updates on the progress of the monsoon will also be closely monitored.

On the global front, developments in the U.S. bond market, the release of FOMC minutes, and progress in the India-U.S. trade negotiations will continue to influence market sentiment. Any significant movements in these areas could heighten volatility in the domestic markets.

Moreover, the scheduled monthly expiry of May derivatives contracts and the final leg of the Q4 earnings season—with results from key companies like Bajaj Auto, Aurobindo Pharma, and IRCTC—will remain in focus.

Technical Outlook

The Nifty’s inability to sustain levels above 25,200 suggests that the index is undergoing a consolidation phase, with immediate support around 24,500, near its short-term moving average (20-DEMA). A breach below this level could lead to further downside toward 24,100, potentially derailing the prevailing positive trend. On the upside, a decisive breakout above 25,200 could reignite bullish momentum and pave the way toward the 25,600 level.

We maintain our view that the banking index holds the key to the next directional move in the Nifty. The index has spent over a month consolidating within a tight range while holding firmly above its short-term support around 54,600 (20-DEMA). A breakout above 56,000 could provide the necessary thrust to test the 57,500 level.

Strategy Ahead

We recommend maintaining a positive bias unless the Nifty decisively breaks below the 24,500 mark, with a continued focus on stock selection. Preference should be given to sectors such as banking, financials, energy, metals, and realty, while remaining selective in others. Traders are advised to maintain strict stop-loss levels and stay prepared for heightened volatility. Keeping abreast of global developments and key domestic policy announcements will be essential in navigating the markets in the weeks ahead.

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