Market Summary

Indian equity markets ended the week on a cautious note, extending their recent corrective phase as concerns over global interest rates, geopolitical uncertainty and volatility surrounding the new Closing Auction Session weighed on investor sentiment. Although markets recovered sharply on Friday, supported by strong buying in IT stocks following upbeat global technology cues, the benchmark indices remained under pressure for the third consecutive week.

For the week, the Nifty declined around 0.31% to close at 24,175.65, while the Sensex fell nearly 0.36% to settle at 77,264.51. In contrast, the broader market remained relatively resilient, with the Midcap and Smallcap indices gaining around 0.52% and 0.51%.

Key Market Drivers

Global monetary policy expectations remained one of the key drivers of market sentiment during the week. Comments from the US Federal Reserve Chairman at the Jackson Hole symposium kept investors cautious regarding the future trajectory of interest rates, with markets increasingly assessing the possibility of a less accommodative policy environment. Rising uncertainty around US inflation and bond yields could continue to influence foreign institutional flows towards emerging markets.

Crude oil prices, however, provided some relief during the week. Brent crude declined by more than 4% to around US$88 per barrel as markets reacted to expectations of improved shipping conditions through the Strait of Hormuz and changing global monetary policy expectations. Nevertheless, geopolitical risks remain elevated and any renewed disruption to energy supplies could quickly reverse the recent decline in crude prices.

On the domestic front, introduction of the Closing Auction Session (CAS) for F&O stocks also remained an important market development. The monthly derivatives expiry witnessed sharp price movements during the closing auction, raising concerns regarding increased short-term volatility and price dislocations, particularly in heavyweight stocks.

Corporate developments remained stock-specific, with IT stocks emerging as the major outperformers following strong global technology cues and encouraging Nvidia results. The Nifty IT index gained around 2.45% during the week, while weakness in select banking and consumer stocks continued to weigh on the broader benchmarks.

Sectoral Snapshot

Sectoral performance remained mixed, with IT emerging as the strongest performer following renewed global technology optimism. Pharma and selected metal stocks also witnessed buying interest, while lower crude prices provided some relief to sectors sensitive to energy costs.

On the other hand, financial stocks remained under pressure, with HDFC Bank among the key laggards during the week. Reliance Industries and Bharti Airtel also witnessed selling pressure, contributing to the underperformance of the benchmark indices.

Key Events to Watch

US employment data will remain the most important trigger, with the August non-farm payrolls report scheduled for September 4. The outcome could significantly influence expectations regarding the Federal Reserve’s September policy decision, the US dollar, Treasury yields and emerging-market fund flows.

The coming week is expected to remain highly eventful, with domestic GDP data and global economic releases likely to determine market direction. India’s Q1 FY27 GDP data will be released on August 31, with economists expecting growth to moderate from 7.8% in the previous quarter.

Investors will also monitor India’s August manufacturing and services PMI readings, GST collections, foreign exchange reserves and developments in the rupee. The progress of the monsoon will remain an important monitorable, particularly after concerns over below-average rainfall and the potential impact on agricultural output, food inflation and rural demand.

Technical Outlook

Nifty

The Nifty remained under pressure during the week and continued to trade within a corrective structure after failing to sustain above the higher resistance zones. However, the index recovered sharply from lower levels on Friday and closed at 24,175.65, indicating some buying interest emerging at lower levels.

The 24,000–23,800 zone remains the immediate support area and is crucial for maintaining the broader structure. On the upside, 24,300–24,400 remains the immediate resistance zone, while a sustained breakout above 24,400 could improve the technical setup and trigger a recovery towards 24,600 levels.

Bank Nifty

Bank Nifty remained relatively weak during the week as selling pressure in heavyweight private sector banks restricted the recovery in the financial segment. The index closed around 57,496 and continues to trade within a broader consolidation phase.

Immediate support is placed around 56,900–56,500, while 57800-58000 zone remains the key resistance area. A sustained move above 58,000 could trigger the next leg of the recovery towards 58,500–58,600. Conversely, a decisive breach below 56,500 could weaken the short-term structure.

Market Breadth

Market breadth remained relatively resilient despite weakness in the benchmark indices and continued caution from foreign institutional investors (FIIs). The Midcap and Smallcap indices gained during the week, indicating that domestic liquidity and stock-specific participation continue to provide support to the broader market, partly offsetting selective FII selling.

The divergence between benchmark and broader indices suggests that investors are not adopting an indiscriminate risk-off approach. Instead, participation remains concentrated in companies demonstrating stronger earnings visibility, improving business prospects and relative strength. Sector rotation and the trend in FII flows are therefore likely to remain important drivers in the near term.

Strategy Ahead

The market enters the coming week with a cautious outlook as global monetary policy uncertainty, geopolitical developments and elevated crude oil prices continue to influence investor sentiment. The upcoming GDP data, PMI numbers and US employment report could result in increased volatility, particularly through their impact on interest-rate expectations and foreign institutional flows.

Investors should maintain a selective approach and focus on companies with strong earnings visibility, healthy balance sheets, sustainable cash flows and resilient business outlooks. IT, banking, financial services, capital goods, infrastructure, defence, pharma and selected metal stocks may continue to offer stock-specific opportunities, while caution is warranted in sectors vulnerable to crude oil volatility and global demand uncertainty.

Amid current volatility, investors should avoid aggressively chasing prices and instead use meaningful declines to gradually accumulate fundamentally strong companies. Disciplined position sizing, prudent risk management and a stock-specific approach will remain important until greater clarity emerges regarding global monetary policy, crude oil prices and geopolitical developments.

Ajit Mishra – SVP, Research, Religare Broking Ltd.