Indian Stock Market Outlook: RBI's FII Incentives and GIFT Nifty Signals Hint at Monday's Trading Dynamics

Indian Equity Markets Expected to Remain Range-Bound as Investors Navigate Complex Mix of Domestic Policy Support and Challenging Global Cues

The Indian equity markets are expected to remain range-bound in the coming week as investors navigate a complex mix of domestic policy support and challenging global cues. While the Reserve Bank of India's (RBI) latest measures to attract foreign capital and the government's tax relief for foreign investors in government securities have improved sentiment, concerns around elevated crude oil prices, the ongoing West Asia conflict, foreign institutional investor (FII) flows, and the progress of the monsoon continue to keep market participants cautious.

The RBI recently kept the repo rate unchanged at 5.25% for the third consecutive policy meeting. Alongside the policy decision, the central bank announced several measures aimed at boosting foreign capital inflows and supporting the rupee, including easing investment norms for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs), incentivizing Foreign Currency Non-Resident (B) deposits, and facilitating foreign currency inflows. The government also exempted foreign portfolio investors (FPIs) from taxes on interest income and capital gains arising from investments in government securities. These steps are expected to improve the attractiveness of Indian financial markets and strengthen investor confidence.

GIFT Nifty Signals Weak Start

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Despite the supportive domestic measures, global cues have turned negative heading into the new week. The GIFT Nifty plunged 356 points, or 1.52%, to 23,091 overnight after stronger-than-expected US jobs data triggered a sharp selloff on Wall Street and pushed US bond yields sharply higher. The decline points to a weak start for Indian equities on Monday.

The fall comes after the Sensex ended Friday's session 117 points lower at 74,243, while the Nifty 50 slipped 50 points to close at 23,366.70. The sharp drop in GIFT Nifty suggests that global concerns are likely to outweigh domestic optimism at least at the opening bell.

Market Experts Weigh in on Potential Market Movement

Market experts believe the RBI's latest measures have strengthened the domestic backdrop, but global developments may continue to dictate near-term direction. Ponmudi R, CEO of Enrich Money, noted that the RBI's decision to keep rates unchanged while simultaneously announcing measures to attract foreign capital is a sentiment-positive development for Indian markets. The move directly addresses concerns around rupee stability, liquidity, and sustained FII participation, which were weighing on investor confidence.

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Ponmudi expects banking, financial services, PSU banks, and other interest-rate-sensitive sectors to attract buying interest. However, he cautioned that elevated crude oil prices, geopolitical tensions in West Asia, higher inflation forecasts, and lower growth projections from the RBI could limit any upside. According to him, the next key trigger will be whether the RBI's initiatives translate into sustained foreign inflows over the coming weeks.

Hariprasad K, SEBI-registered Research Analyst and Founder of Lifelong Wealth, believes Indian markets could begin Monday's session on a flat-to-positive note despite the global uncertainty. "Indian markets are likely to begin Monday's session on a flat-to-positive note following the RBI's policy announcement and the government's measures aimed at attracting foreign capital. The combination of a stable interest rate environment and fresh incentives for foreign investors has helped ease immediate concerns around capital outflows."

Hariprasad believes investors are balancing the positive impact of policy support against the RBI's lower FY27 growth projections and higher inflation forecasts. According to him, banking and financial stocks could remain in focus as lower bond yields and improved confidence around capital flows create a favourable environment. Infrastructure and capital goods companies may also benefit. However, he expects IT stocks to remain under pressure due to concerns over global technology spending, a potentially stronger rupee, and higher-for-longer US interest rates.

Technical Levels to Watch

From a technical perspective, traders remain cautious as the benchmark index continues to trade below key moving averages. Virat Jagad, Senior Technical Research Analyst at Bonanza, noted that Nifty remains under pressure, trading below the 20, 50, 100, and 200 EMA, confirming a bearish short-term trend. Immediate support is placed near 23,250-23,300, while resistance is seen at 23,700-23,750. RSI below 40 reflects weak momentum.

Jagad noted that a close below the 23,250 level could trigger a fresh leg of weakness towards the 23,000 mark. At the same time, he believes the RBI's foreign capital measures could provide a mildly positive bias, particularly for banking and financial stocks. However, he emphasized that Monday's opening will ultimately depend on global market performance, US bond yields, crude oil prices, and GIFT Nifty trends. If global sentiment stabilizes, Nifty could attempt a gap-up opening towards the 23,500-23,600 zone.