Indian equity markets are bracing for a period of heightened volatility, driven by a complex mix of global uncertainties and a packed calendar of crucial domestic economic data, according to market analysts.
Key Factors Driving Market Volatility
Experts point to a dual challenge for investors. On the global front, renewed concerns over the valuation of artificial intelligence (AI) stocks have triggered profit-taking in major international markets, dampening overall risk appetite. This external pressure is combining with domestic headwinds, including persistent foreign institutional investor (FII) outflows and a mixed bag of corporate earnings results.
Despite some positive domestic developments, such as improved GST collections and a festive-season surge in retail sales, the overall sentiment has remained subdued. The market tone during the previous holiday-shortened week was negative, with both benchmark indices declining by over 0.80 per cent. The Sensex closed at 83,216.28, while the Nifty settled at 25,492.30.
Domestic Data in the Spotlight
The upcoming week is considered critical, with several key macroeconomic indicators scheduled for release. All eyes will be on India's Consumer Price Index (CPI) inflation and Wholesale Price Index (WPI) inflation data. These figures will provide vital insights into the country's inflation trajectory and heavily influence the future policy outlook of the Reserve Bank of India.
"Markets are likely to remain volatile in the near term amid global uncertainties and a heavy flow of economic and earnings data," said Ajit Mishra, SVP of Research at Religare Broking Ltd.
While short-term sentiment may stay cautious, Mishra also noted that improving domestic macro indicators and steady corporate performance could offer underlying support to the markets.
Technical Outlook and Broader Market Trends
From a technical perspective, analysts are identifying key support levels for the Nifty index. "Looking ahead, the 25,300-25,250 zone is expected to serve as a crucial support area for Nifty," stated Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities.
The broader markets are expected to show a mixed trend. Larger midcap companies are likely to demonstrate relative strength and may even outperform, while smallcap stocks could continue to face selling pressure and profit booking. This was evident in the previous week's performance, where the Midcap index ended flat, but the Smallcap index declined by a significant 1.7 per cent.
Sectoral performance has also been uneven. Metal, IT, and FMCG sectors were major drags on the benchmarks, while selective strength in Financials and Banking stocks provided some partial support to the indices.
