The Indian stock market broke its three-week slump, showcasing a notable resurgence fueled by positive global and domestic signals, particularly amidst developments regarding U.S. tariffs. This rebound has rekindled optimism among D-Street investors, setting the stage for a crucial week ahead as they look towards vital economic indicators and policy announcements.
Market Recovery Amidst Growing Confidence
Both the Sensex and Nifty 50 indices experienced a robust comeback, largely attributed to short covering as they approached pivotal support levels. This prompted traders to unwind their bearish stances, resulting in:
- Nifty 50 climbing 1.9% this week, marking its strongest performance in three months.
- Sensex gaining 1.6%, securing its highest weekly increase since the end of January.
- The broader markets also displayed strength, with small-cap and mid-cap indices rising roughly 5.5% and 2.6%, respectively.
According to Vinod Nair, Head of Research at Geojit Financial Services, while the domestic market has recovered from oversold conditions, future momentum hinges on corporate earnings and clarity regarding tariff policies. He noted that the current elevated valuations of broader indices might hinder a widespread market recovery in the near term, although large-cap stocks appear increasingly attractive.
Upcoming Triggers for Investors
Investors are poised to keep a close eye on several key factors this coming week that may influence market dynamics:
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Inflation Data:
- The upcoming release of the consumer price index (CPI) inflation data and the index of industrial production (IIP) will be pivotal. Notably, Union Bank of India forecasts food inflation to dip below 5% for the first time since June 2023. Additionally, India’s retail inflation is anticipated to drop below 4% in February 2025, driven mainly by lower vegetable prices.
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Initial Public Offerings (IPOs):
- The primary market is expected to see minimal activity, with no new IPOs slated for the mainboard. However, two new issues will be available for subscription in the SME segment, with one SME making its debut on either BSE SME or NSE SME this week.
- Foreign Institutional Investor (FII) Activity:
- Recent data indicates that FIIs experienced net outflows of ₹15,501 crore in the cash segment, while domestic institutional investors (DIIs) provided a counterbalance with an infusion of ₹20,950 crore. Dr. V K Vijayakumar, Chief Investment Strategist at Geojit, remarked on the continued trend of FII selling, although there are signs of a slight easing.
Global Market Influences
Investor sentiment was bolstered by reports of a delay in U.S. tariffs, suggesting ongoing negotiations that could stabilize financial markets. A weaker U.S. dollar and a decline in crude oil prices further contributed to this positive outlook. Key factors to watch include:
- Updates on tariff negotiations and geopolitical tensions.
- Movements in the U.S. dollar and international crude oil prices.
Oil Market Movements
Crude oil prices saw fluctuations, dipping after U.S. President Donald Trump hinted at sanctions on Russia if it fails to negotiate a ceasefire in Ukraine. Recent market data reported:
- Brent crude futures settled at $70.36 a barrel, marking a 1.3% increase.
- U.S. West Texas Intermediate (WTI) futures closed at $67.04, up 1.02%.
Despite these gains, both Brent and WTI experienced their largest weekly declines since November.
Technical Outlook
From a technical standpoint, the Nifty 50 faces significant resistance at its 20-day Exponential Moving Average (DEMA) around 22,700. A close below 22,250 could impede recovery, leading to a potential retest of the support zone near 22,000.
As the market braces for the next week, investors are encouraged to stay informed and ready to adapt to the ever-changing landscape.
