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

The markets resumed their corrective trend after a brief period of consolidation, shedding over two and a half percent for the week. Despite a flat opening, pressure from heavyweight stocks pushed the benchmarks lower, resulting in a muted session to close out the week. Mounting concerns over rising CPI inflation and persistent disappointments in corporate earnings weighed heavily on sentiment. As a result, the Nifty and Sensex settled near the week's lows at 23,532.70 and 77,580.30, respectively.

Most sectors mirrored the benchmarks' downward trajectory, with metals, FMCG, and auto stocks among the hardest hit. However, the IT sector showed resilience, managing to gain nearly a percent amid the widespread selling. Broader indices, including midcap and smallcap stocks, were hammered, losing over 4% each.

The upcoming week is also shortened due to a holiday, and with the earnings season largely concluded, attention will shift back to FII flows. Foreign institutional investors have been on a consistent selling spree for the past month and a half, offloading around Rs.4 lakh crore in the cash market to date. Additionally, traders will keep a close watch on global market trends.

The Nifty recently tested its long-term moving average, the 200 DEMA, after breaking down from its previous consolidation range of 24,000-24,500, marking an overall correction of nearly 11% from its recent peak. Key indices like banking, midcap, and smallcap also tested their long-term support zones last week. The performance of the banking and IT sectors will be crucial in determining the market’s next move. A breach below 49,900 in the banking index could further pressure the Nifty down to the 22,700-23,100 range, while any recovery may face resistance around the 23,900-24,200 levels.

Given the current conditions, a “sell on rise” strategy remains advisable for the index, while stock selection should be done with caution. For long-term investors, gradually accumulating fundamentally strong stocks with solid earnings could be a prudent approach.

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