The Indian stock market had a challenging yet eventful week, facing headwinds from rising inflation and foreign institutional investor (FII) outflows.
Both the NIFTY50 and SENSEX managed to find support at critical technical levels, but the market sentiment remained cautious as concerns over inflation and potential rate hikes lingered.
Below, we break down the key developments from the week and what they mean for investors going forward.
Overview of Market Performance: A Volatile Week Amid Rising Inflation
In a holiday-shortened week, the Indian equity markets experienced a downward trend, primarily driven by inflationary pressures and continued FII selling.
Despite a decline, major indices managed to show signs of stabilization by holding above their 200-day Exponential Moving Average (EMA).
- SENSEX closed at 77,580.31, down by 0.14% (110.64 points) on the last trading day of the week.
- NIFTY50 ended at 23,532.70, losing 0.11% (26.35 points).
- For the week, SENSEX dropped 2.4%, while NIFTY50 lost 2.5%. Both indices are now over 10% below their recent all-time highs.
Key Takeaways
- Inflation is a growing concern, with October’s wholesale price index (WPI) climbing to 2.36%, a notable increase from September’s 1.84%.
- FIIs have been net sellers, pulling funds out of Indian equities amid global economic uncertainty and local inflation concerns.
- Despite a challenging week, Indian indices have shown resilience, managing to hold above critical support levels at the 200 EMA.
Sectoral Trends: Winners and Losers
The week’s sectoral performance was mixed, highlighting both opportunities and risks across various industries.
Top Gainers
- Auto Sector: Led by companies like Eicher Motors, which gained 6.43% following strong earnings reports, and Hero MotoCorp, up 1.87%.
- NIFTY Media: A standout performer with a 2.2% weekly gain, driven by positive news in the entertainment and digital media spaces.
- NIFTY Realty: Benefitted from continued demand in real estate, gaining 1.03% over the week.
Top Losers
- FMCG Sector: The worst hit, falling 1.5% on concerns that rising inflation could curb consumer spending. Major players like Hindustan Unilever and Tata Consumer saw declines of over 2.5%.
- NIFTY PSU Banks: Down 0.7%, as investors remain wary of government-controlled sectors amid macroeconomic uncertainties.
Significant Market Movements
- The NIFTY IT index was the only sector to end the week with gains, up 0.8%, as global demand for technology services remains strong.
- On the flip side, NIFTY Metals and PSU Banks faced steep losses, down 8% and 7% respectively, due to fears of slower economic growth.
Global Influences: Mixed Signals from International Markets
The Indian market did not operate in isolation—global factors also played a role. Here’s a snapshot of how international developments impacted Indian sentiment:
- European Markets: Ended mostly higher, supported by positive earnings despite ongoing inflation concerns. Investors were cautiously optimistic ahead of Eurozone growth data.
- Asian Markets: A mixed bag, with some indices closing in the red due to concerns over the U.S. Federal Reserve’s stance on inflation and potential policy changes.
- U.S. Influence: Rising bond yields and speculation about changes in U.S. trade policy under Trump’s administration kept global markets on edge.
Stock Highlights: Key Gainers and Notable Moves
Despite a generally bearish trend, several stocks stood out due to positive earnings or other favorable factors:
- Eicher Motors: Surged 6.4% on strong quarterly earnings, exceeding market expectations.
- Jio Financial Services, Paytm, and Zomato: Each gained 5-7% following their inclusion in the NSE’s futures and options (F&O) segment.
- Hindustan Aeronautics Limited (HAL): Posted a 22.1% increase in net profit for Q2 FY25, driving shares up by 0.85%.
Key Takeaways
- Some auto stocks have shown strong performance despite economic concerns, suggesting resilience in the sector.
- Companies newly included in the F&O segment, such as Paytm and Zomato, saw immediate investor interest, reflecting market optimism about their future potential.
Technical Outlook: Support and Resistance in Focus
Technical analysis suggests the market is at a crucial juncture, with indices testing significant support levels:
- NIFTY50 is hovering near its 200-day EMA, indicating a “sell on rise” scenario as the index remains in an oversold zone.
- Analysts are watching key levels: Support at 23,450 and Resistance at 23,650.
- A break below the 200 EMA could intensify selling pressure while holding this level could trigger a short-term bounce.
The Road Ahead: What to Watch
As the market looks forward, several factors will play a crucial role in shaping future trends:
Opportunities
- Domestic Earnings: Improvement in domestic business conditions and earnings could buoy market sentiment.
- Government Spending: Post-election government policies and increased spending may provide a stimulus, especially in infrastructure and rural development.
- Sector Rotation: Continued resilience in auto and IT sectors might offer opportunities for investors seeking long-term gains.
Risks
- Persistent Inflation: If inflation continues to rise, it could delay rate cuts, affecting borrowing costs and consumer spending.
- Global Economic Uncertainty: U.S. and European economic policies, especially trade and monetary policy, could impact global investor sentiment and capital flows into India.
- FII Behavior: Continued outflows from FIIs remain a concern, as global investors adjust portfolios amid geopolitical and economic uncertainties.
Conclusion: Cautious Optimism Amid Challenges
The Indian stock market is navigating a delicate balance between inflation concerns and the resilience shown by key sectors.
While the broader market’s downward trend is evident, technical support levels and renewed interest in certain stocks suggest that investors are not giving up hope just yet.
Going forward, inflation, FII activity, and global cues will be critical in determining market direction.
For investors, this is a time to stay informed, cautious, and vigilant, watching for both short-term trading opportunities and long-term investment prospects as the market digests economic data and global trends.
Key Points Recap
- NIFTY50 and SENSEX are down over 2% for the week, holding above 200 EMA support.
- Rising inflation and FII selling are weighing on sentiment.
- Auto and IT sectors show resilience; FMCG struggles amid inflation concerns.
- Global influences remain mixed, with European and U.S. policies closely watched.
By keeping an eye on the evolving macroeconomic landscape, market participants can make informed decisions as they navigate these challenging yet potentially rewarding times.
Also, Read | October’s Wholesale Inflation Reaches Four-Month High Amid Rising Food Prices