Nifty broke its eight-week losing streak on Friday, helped by a late-week rebound in IT, FMCG and auto shares, giving traders some relief after one of the longest periods of market weakness in 25 years. The index rose nearly 1.3%, or 289 points, on Friday to close at 22,520. For the week, Nifty ended higher by about 100 points, enough to avoid a ninth straight weekly loss. The recovery came after a sharp slide on Thursday had pushed the index near a fresh 52-week low and raised fears that the market rout would extend for another week.
What began as a correction in the last few weeks has turned into a broad risk-off move, led by foreign selling, and higher crude oil prices. Over that eight-week stretch, Nifty and Sensex lost 8.7% and 8.4%, respectively. In the previous holiday-shortened week alone, Nifty fell 3.1%, with crude near $100 a barrel, record foreign selling and a spike in global bond yields weighing on sentiment.
The selloff was also broad-based. Midcap and smallcap stocks weakened along with frontline names, showing that the pressure was no longer limited to large caps. Market breadth stayed weak and several sectors saw sharp profit booking after a long stretch of expensive valuations.
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Foreign investors remained the biggest drag. With the US 10-year Treasury yield hovering above 5%, the relative appeal of emerging-market equities weakened. Higher crude added to India-specific concerns because it raises the risk of a wider import bill, inflation pressure and rupee weakness.
This week had begun with some promise. Nifty closed higher on Monday and Tuesday, raising hopes that oversold conditions could trigger a stronger bounce. The mood changed after the Reserve Bank of India raised the repo rate by 25 basis points to 5.5% and shifted its policy stance to calibrated tightening. The move signalled that inflation and financial conditions remain a concern, keeping rate-sensitive sectors under pressure.
By Thursday, selling had intensified. Nifty slipped below 22,200 and touched 22,181 as crude prices, FII selling and weak global risk appetite hit sentiment. But Friday brought a reversal, led by IT stocks after optimism around TCS’s results and improving expectations around AI-linked revenue opportunities.
Vikram Kasat, Chief Business Officer, Advisory and Dealing, PL Capital, said Indian equities staged a strong recovery, with IT stocks leading the rebound while FMCG and auto shares also gained. Midcaps rose 1.66%, while India VIX declined 5.37% to 14.46, signalling easing near-term volatility.
"Softer crude prices and a firmer rupee provided additional support, although persistent FII selling and global uncertainties remain key risks," Kasat said. He added that sustained institutional buying, corporate earnings and stability in crude prices will decide whether the recovery turns into a durable uptrend.
Vinod Nair, Head of Research at Geojit Investments, said the market saw a relief rally supported by value buying and short covering after the recent correction. IT stocks outperformed on a strong start to the Q2 earnings season and rising confidence in AI-driven revenue opportunities.
He said sentiment was also helped by easing geopolitical concerns after indications that any potential US military action against Iran may not happen before the midterm elections, which helped crude prices moderate. However, he warned that persistent FII outflows and elevated global bond yields continue to limit the recovery outlook.
Vinit Bolinjkar, Head of Research at Ventura, said the week was volatile. The RBI rate hike hurt banks, realty and auto stocks, while Thursday's fall reflected global risk aversion. Friday’s bounce was led by IT after a US announcement on labour certification rules.
Will this also spur further rally?
Investors now await domestic CPI data on Monday for further cues on the interest-rate trajectory after the RBI's shift to calibrated tightening. Nair said, Q2 earnings performance, which is expected to be strong on a year-on-year basis, will be critical in deciding whether the market rebound can sustain.
According to Bolinjkar, the main overhangs remain high crude oil, a weak rupee, rising US bond yields and continued FPI selling. Next week, investors will track Q2 earnings from large IT companies, crude prices and global bond yields.
The outlook remains choppy. Nifty has avoided a historic ninth weekly loss, but the recovery still needs confirmation. For bulls, 22,500 now becomes the first level to defend. A sustained move above 22,800 could improve sentiment, while a fall below 22,180 may again bring 22,000 into focus.
Disclosure: This article has been written by Podishetti Akash, who is not a SEBI-registered Research Analyst or an Investment Adviser. Podishetti Akash and his ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclosures here.
