The Indian stock market witnessed a remarkable rebound last week, with benchmark indices Nifty and Sensex surging over 4%. This sharp rise was fueled by improved investor sentiment, increased foreign inflows, and favorable global factors. According to Ajit Mishra, SVP of Research at Religare Broking Ltd., while market sentiment remains positive, investors should exercise caution and closely monitor key technical levels and global cues to navigate potential volatility.
Strong Market Performance
Both the Nifty and Sensex closed near their weekly highs, with the Nifty ending at 23,350.4 and the Sensex at 76,905.51. Over the five-day rally:
The BSE benchmark gained 3,076.6 points (4.16%).
The Nifty rose by 953.2 points (4.25%).
This rally boosted the wealth of equity investors by ₹22.12 lakh crore.
The total market capitalization of BSE-listed companies soared to ₹4,13,30,624.05 crore ($4.79 trillion), reflecting the market’s strong upward momentum. Leading financial stocks played a major role, climbing 5.5% and significantly contributing to the benchmark indices’ gains.
In addition, the Indian rupee posted its best weekly performance in over two years on Friday, further enhancing the market’s positive outlook.
Key Market Drivers
Several factors contributed to the market’s sharp recovery:
Foreign Inflows: Reduced selling pressure from foreign institutional investors (FIIs), with positive flows in both cash and derivatives segments, brought stability.
Global Factors: The US Federal Reserve’s dovish stance, indicating the possibility of two interest rate cuts this year, boosted optimism.
Lower Crude Oil Prices: A decline in oil prices and the dollar index supported market sentiment.
Geopolitical Relief: Reports of de-escalation in the Russia-Ukraine conflict added to the optimism.
The rally was broad-based, with gains across all major sectors. Realty, energy, and pharma stocks were the top performers, while midcap and smallcap indices surged by 7.7% to 8.6%, further strengthening the bullish momentum.
Outlook for the Week Ahead
With no major domestic economic events on the horizon, the focus will shift to:
March derivatives contract expiry: This could introduce short-term volatility.
FII activity: Continued foreign fund inflows will be a key factor to watch.
Global cues: Investors will track developments in US markets, with particular attention to tariff-related updates and GDP growth data, which may influence sentiment.
Although US markets showed some stability following a recent sharp decline, mixed signals suggest the potential for volatility in the sessions ahead.
Key Technical Levels to Watch
Ajit Mishra highlights the importance of monitoring critical technical levels:
Nifty: The index’s recent breakout from the 22,250-22,650 range has brought it near a key resistance level around 23,400, where the 100-DEMA and 200-DEMA moving averages are positioned. A sustained move above this level could push the Nifty towards the 23,800-24,100 zone. On the downside, the 22,750-23,000 range is expected to act as strong support in case of a pullback.
Banking Sector: Banking and financial stocks have been central to the rally. The banking index has reclaimed major moving averages, and a breakout above 50,800 could drive gains towards the 51,700-52,800 range. Conversely, 49,900 will serve as a crucial support level.
Trading Strategy Tips
Given the current market landscape, investors should consider the following strategies:
Stay Selective: Focus on fundamentally strong sectors, particularly financials, realty, and pharma.
Monitor Global Cues: Keep a close watch on US economic data and geopolitical updates, which could influence global market trends.
Risk Management: Use stop-loss strategies to protect against potential volatility, especially around key resistance and support levels.
While the overall market sentiment remains optimistic, exercising caution and adhering to disciplined trading strategies will be essential for navigating the week ahead.
Disclaimer:
The information provided in this article is for informational purposes only and does not constitute financial advice or recommendations. Stock market investments are subject to market risks, and past performance is not indicative of future results. Investors should conduct their own research, consult with a qualified financial advisor, and consider their risk tolerance before making any investment decisions. The author and publisher are not responsible for any financial losses or gains resulting from actions taken based on the information provided.
