Indian equity markets extended their losses for a third consecutive week, weighed down by a weakening rupee and subdued global signals. The benchmark Nifty 50 index closed the week at 25,966.40, marking a decline of 80 points or 0.3%. The broader market indices, however, showed resilience and ended the period largely flat.
Friday's Rebound and Weekly Technical Picture
Despite the weekly loss, trading on Friday provided a much-needed boost. Both the Sensex and Nifty snapped their four-day losing streak to end the session with solid gains. The Sensex surged 448 points, or 0.53%, to settle at 84,929.36. The Nifty 50 advanced 151 points, or 0.58%, closing at 25,966.40. The broader markets outperformed the frontline indices, with the BSE Midcap index climbing 1.26% and the Smallcap index gaining 1.25%.
From a technical perspective, the weekly price action formed an inside bar, which analysts interpret as a signal of deceleration in the downward momentum. Sectorally, IT, FMCG, and PSU banks remained in focus, while financials took a pause after their recent gains.
Analyst Outlook and Key Triggers for the Coming Weeks
According to Dharmesh Shah, Vice President at ICICI Securities, Friday's sharp rebound has brought the index closer to the upper band of a downward-slanting channel. He notes that a resolute breakout above 26,050 would confirm the resumption of the uptrend. This could pave the way for the index to challenge its All-Time High around 26,300 and potentially move towards 26,700 in the coming month.
Shah highlighted the market's inherent strength, pointing out that the index has respected its 50-day Exponential Moving Average (EMA) during the corrective phase. He also noted that the Bank Nifty has been trading around its 20-day EMA despite global volatility, and a pullback in the IT and Oil & Gas sectors signifies a revival in upward momentum.
Historically, the period has been favourable for equities. Data since 1995 suggests that on 90% of occasions, the Nifty has delivered positive returns in the last 10 days of the year, with a median return of 2%, hinting at a potential Santa rally.
A critical factor being watched is the USD/INR pair. Last week, it retreated from the upper end of its long-term rising wedge pattern. Historically, such retreats have been followed by strong rallies in the Nifty. In five past instances, an average ~4% decline in USD/INR over two months preceded average Nifty gains of over 10% in the subsequent two months.
Key Monitorables for the Upcoming Week
Analysts have identified several factors that could influence market direction in the short term:
- India-US Trade Deal: A favourable outcome could accelerate positive momentum and potentially bring Foreign Institutional Investors (FIIs) back to Indian markets.
- US GDP Data: Key economic data from the United States will be closely watched for global cues.
- Brent Crude Oil: Prices dropped around 2% during the week and surpassed their previous swing low. A further cool-off in oil prices is seen as positive for the import-dependent Indian economy.
Stocks to Consider This Week
Dharmesh Shah of ICICI Securities has recommended two stocks for investors to consider:
Larsen & Toubro (L&T): The recommendation is to buy in the range of ₹3,980-4,070. The set target price is ₹4,520, with a stop-loss advised at ₹3,798.
LTIMindtree: The advice is to buy between ₹6,020-6,200. The target price for this IT stock is ₹7,000, with a stop-loss at ₹5,848.
Disclaimer: The views and recommendations are those of the individual analyst. Investors are strongly advised to consult certified experts before making any investment decisions, as market conditions can change rapidly.
