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

The markets traded within a tight range and ended nearly half a percent lower, extending the ongoing corrective phase. With no major domestic events, the persistent foreign fund outflows and comments from the U.S. President on potential tariffs kept market sentiment subdued throughout the week. While select pockets showed resilience, they failed to drive a meaningful recovery. As a result, both benchmark indices, Nifty and Sensex, closed near their weekly lows at 22,795.90 and 73,311.06, respectively. 

On the sectoral front, a mixed trend kept participants engaged. Metals, energy, and realty outperformed, while auto, pharma, and FMCG were the top laggards. Meanwhile, broader indices—midcap and smallcap—rebounded by approximately 1.5% each after a sharp decline, providing some relief. 

Looking ahead, the upcoming holiday-shortened week is expected to remain volatile due to the expiry of February’s derivative contracts. Additionally, trends in foreign institutional investor (FII) flows and updates on U.S. tariff policies will be closely watched. 

On the benchmark front, a decisive break below 22,700 in Nifty could trigger the next leg of the downtrend, potentially dragging the index to 22,500 and then 22,000. On the upside, a recovery would first face resistance at 23,150 (20-DEMA), and a breakout above this level could extend gains towards the next major hurdle at 23,600 (200-DEMA).  We reiterate our view to focus on banking and IT, as these sectors have shown relatively higher strength during the correction and will be key in determining the market’s next directional move.

Among other sectors, metals and energy indicate further recovery potential, while pharma remains vulnerable to more downside. In the broader market, traders should not read too much into the recent rebound and should use any further recovery to reduce positions while waiting for clear signs of trend reversal.

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