Market Outlook: Geopolitical Tensions and Earnings Reports to Influence Trading

Indian Equity Markets Snap 6-Week Losing Streak

The Indian equity markets had a week to remember, snapping a painful six-week losing streak to post their best weekly performance since February 2021. A confluence of improving global cues, easing geopolitical tensions, a strengthening rupee, and a noticeable slowdown in foreign selling helped in lifting market sentiment.

The week began on a cautious note, with investors keeping an eye on the rhetoric between the United States and Iran. Reports of a two-week ceasefire and ongoing diplomatic negotiations brought meaningful relief to global markets, triggering a decisive risk-on rally. Markets were further helped by reports of peace talks between Israel and Lebanon.

Oil prices, which had surged sharply in recent weeks, plunged on Wednesday in their steepest single-day decline since 2020, offering additional comfort to equity investors worldwide.

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Against this backdrop, the Nifty 50 surged 5.89% over the week to settle at 24,050.60. The broader market fared even better, with the Nifty Midcap 100 advancing nearly 8% and the Nifty Smallcap Index rising 7.6%.

Every sectoral index closed the week in positive territory, with the Nifty Realty Index leading with a spectacular 13% gain, followed closely by the Nifty Capital Market Index, which gained 11.7%. The Nifty Auto Index surged 11.5%, and the Nifty Consumer Durables Index jumped over 9%.

On the institutional front, FIIs remained net sellers for a seventh consecutive week, offloading shares worth Rs 20,710.35 crore, though the pace of selling was notably more restrained. The Indian rupee continued to recover, appreciating 37 paise against the US dollar over the week to close at 92.73.

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US stock indices also posted solid gains for a second straight week, buoyed by the same tailwinds of de-escalating Middle Eastern tensions and tumbling oil prices.

Looking ahead, two forces will decide market direction. The more powerful is the evolving situation in the Middle East, where developments have already demonstrated they can move markets considerably. Any fresh escalation could quickly unsettle the markets.

Indeed, with the truce talks between the US and Iran failing, market volatility is likely to increase in the coming week. Keep an eye out for oil and gas prices along with the movement of the Indian rupee.

Also, this is the start of the corporate earnings season, where results from frontline stocks will also have an impact on the market direction. Strong numbers could help push the rally further.

Charts Indicate Bullish Undercurrent

On the weekly timeframe, the Nifty 50 closed higher by 5.89% to settle at 24,050.6, capping a week of strong price action that carries meaningful technical significance.

The RMI indicator has reached an extreme zone where a sharp turnaround is now visible. While a formal bullish crossover is yet to materialise, the setup is increasingly pointing toward a reversal. Price continues to trade below the 40-week exponential moving average, but what stands out is the sturdy support found at a key trendline that has now held on three separate occasions. Last week, price touched that trendline and firmly rejected lower levels, and this week followed through with a strong green bar, signalling that buyers have stepped in with conviction at precisely the right level.

This combination of a major trendline rejection and a powerful follow-up candle sets the stage for the next leg higher. If the momentum is sustained, Nifty is expected to advance toward the next significant resistance zone on the weekly chart, which coincides with the region of previous all-time highs.

Sector Rotation

The Relative Rotation Graph shows that Nifty Consumer Durables, Nifty Infrastructure, and Nifty MNC are in the leading quadrant, indicating they are gaining strength. On the other hand, Nifty Energy, Nifty PSU Banks, and Nifty Financial Services are experiencing a sharp decline in momentum, making them potential sources of continued bearishness if the market weakens further.

Stocks to Watch

Among the stocks expected to perform better during the week are Avanti Feeds, Shriram Pistons, Bajaj Consumers, Apar Industries, Cummins India, SAIL, Titan, and BSE.