The Indian stock market experienced a noteworthy rebound this past week, shaking off three weeks of losses with an impressive gain of nearly 2%. Positive global indicators, including a weakened US dollar and a slight decrease in foreign capital outflow, contributed significantly to the renewed optimism among investors. Despite a minor dip on Friday, the week ended on a high note, showcasing resilience in the face of recent volatility.

Weekly Performance Overview

The NSE Nifty 50 surged by 427.8 points, marking a 1.9% increase, its strongest weekly performance in three months. Meanwhile, the BSE Sensex achieved a gain of 1,134.48 points or 1.6%, representing its highest weekly increase since the end of January. Despite this upswing, both indices remain about 14% below their record highs from September 2024, affected by sluggish corporate earnings and ongoing foreign sell-offs.

• Sector Highlights:
  • All 13 major sectors saw positive movement, with mid-cap stocks rising 2.66% and small-cap stocks climbing 5.5%.
  • Reliance Industries, a key player in the Nifty 50, rebounded 3.3% on Friday after hitting a 15-month low earlier in the week, buoyed by favorable valuations noted by global brokerage firms.
  • The metals sector experienced an 8.6% surge, achieving its best performance in nearly four years, fueled by expectations of increased stimulus from China and plans to curtail steel production.

Notable Stock Movements

Mahindra & Mahindra (M&M), anticipated to be significantly impacted by potential changes in import duties on US vehicles, saw its stock rise 5.5% last week. Analysts assessed that the expected policy changes would minimally affect domestic auto manufacturers.

Market Sentiment and Future Outlook

The past week was characterized by fluctuating markets and a backdrop of escalating trade tensions, prompting investors to remain vigilant regarding developments from the Trump administration. Analysts suggest that while recent market corrections may encourage bargain hunting among large-cap stocks, uncertainty will persist until there is clarity on reciprocal tariffs.

• Key Technical Levels:
  • Amol Athawale, VP of Technical Research at Kotak Securities, noted that the Nifty and Sensex bounced back sharply after dipping below critical levels of 22,000 and 72,800, forming a reversal pattern that indicates potential for further gains.
  • Immediate support levels are set at 22,400/74,000 and 22,300/73,700. A sustained climb above these thresholds could propel the indices towards 22,750/75,200.

Insights from Market Analysts

According to Ajit Mishra, Senior VP of Research at Religare Broking, the Nifty 50 faces resistance at the 20-day Exponential Moving Average (DEMA) near 22,700. A move above this level could push the index toward the 23,200-23,400 range. However, closing below 22,250 might stall recovery efforts.

Puneet Singhania, Director at Master Trust Group, highlights that after three weeks of decline, the Nifty rebounded from its 100-week EMA at 22,051. He points out that a sustained rally above 22,700 could lead to further upward momentum, while any drop below 22,300 might signal a downturn toward 22,000.

Strategic Recommendations for Investors

With the market’s current trajectory, investors are encouraged to adopt a cautious yet optimistic stance. Ajit Mishra recommends focusing on companies showcasing strong performance potential while being mindful of market volatility.

• Key Considerations:
  • Limit aggressive positions as broader indices approach initial resistance levels.
  • Stay alert to key global and domestic developments that could influence market conditions.

Experts emphasize that the sustainability of the recent rally hinges on the recovery of corporate earnings and overall market sentiment. While large-cap stocks seem well-positioned, the broader market may consolidate unless earnings growth accelerates. Krishna Appala, Senior Research Analyst at Capitalmind Research, suggests a staggered investment approach, particularly in large-cap stocks, while remaining cautious with small caps until earnings visibility improves.

In summary, while the Indian stock market displays signs of recovery, maintaining a balanced and informed investment strategy will be crucial for navigating the evolving landscape ahead.