Moneycontrol Pro Market Outlook | Markets steady amidst concerns over terrorism response

Indian markets faced challenges maintaining consistent momentum.

Dear Reader,

The week was marked by heightened anticipation regarding a potential retaliation from the Indian government against Pakistan following a terrorist attack in Kashmir, leading to increased intraday volatility in the markets. The week began with a sharp rally on Monday, but trading soon settled into a narrower range for the remainder of the week.

By the week's end, the Nifty50 recorded a gain of 1.2 percent, contributing to an overall increase of 3.5 percent for April. This upward momentum was primarily driven by substantial foreign institutional investment, which reached Rs 7,680.09 crore during the week. Notably, this marked the third consecutive week of FII buying, culminating in a total net investment of Rs 2,735.02 crore for the month.

While the Indian markets faced challenges maintaining consistent momentum, global markets generally experienced robust growth. For instance, the S&P 500 Index enjoyed a remarkable nine-day winning streak, marking its longest gains since January 2025. The accompanying chart illustrates the performance of various global indices during this period.

Source: Investing.com

The global market experienced a surge of positive sentiment following a significant announcement from the US President, who decided to roll back specific tariffs on the auto sector. This move, coupled with news from US officials that a major trade deal was inching closer to completion, invigorated investor confidence worldwide.

Despite the Indian markets closing on a positive note, there remains an underlying structural weakness. Throughout the week, the number of declining stocks far exceeded those that gained. Investors will closely watch developments in the government's actions toward Pakistan, as these may significantly influence market sentiment.

Mixed Signals

Nifty managed a third week of gains and hit the 61.8% retracement mark of the entire fall from the September 2024 top. With this, we are at the first hurdle in the market's progress, which coincides with the weekly bands. This level, near 24560, is a level to watch over the next few days. As long as we are below this level, another leg down cannot be ruled out. There are lots of mixed signals, and therefore, the near-term trend is more important.

The swing fell to 17 again, even as the market moved higher. This shows weakness in the broad market reaching an extreme. Will this result in a temporary bounce higher or a completely new trend? It remains to be seen. The reading ended the week at 33, so it is not oversold anymore.

Source: web.strike.money

The client category of participants has seen their position go back from the highest longs on record to a short position, the highest since September. Once again, we are getting a good setup for a medium-term market top.

Source: web.strike.money

FIIs have completely eliminated their short positions on index futures and are nearing a positive reporting status. This situation has opened up the potential for a decline, allowing for the re-establishment of short positions.

Source: web.strike.money

Sector Rotation

Nifty 50 – The Benchmark Index, closed at 24346.70, up by 1.28% from last week’s close.

Indices positioning on Weekly Timeframe

Weakening Quadrant:  None of the Sector Indices is in this quadrant.

Lagging Quadrant: Nifty Pharma, Nifty Auto, Nifty Consumer Durables, and Nifty Realty are headed in the North, indicating an increase in momentum.

Improving Quadrant: The Nifty PSU bank, Nifty Infrastructure, Nifty Oil & gas, Nifty Energy, and Nifty India Consumption showed improvement in momentum and are headed towards the Leading quadrant. If momentum continues to improve, these sectors can be the Leaders next week.

Leading Quadrant: Nifty Bank, Nifty Private Bank, and Nifty Financial Service are still Leading but have started sloping down, indicating exhaustion in their momentum. Nifty Metal is headed South and may enter the Lagging quadrant directly.

Indices position on the daily timeframe

Weakening Quadrant: Nifty Bank, Private Bank, PSU Bank, Financial Services, India Consumption, FMCG, Consumer Durables and Infrastructure are losing momentum.

Lagging Quadrant: Nifty Media and Energy have entered from the Weakening quadrant, indicating underperformance compared to the Benchmark.

Improving Quadrant: Nifty Pharma and Nifty Metal have entered from the Lagging quadrant, showing stronger momentum. Nifty IT is steadily gaining strength.

Leading Quadrant: Nifty Realty entered this quadrant from the Improving quadrant but also showed a lack of momentum. This week's outperformer is Nifty Oil & Gas, which entered from the Weakening quadrant directly, indicating a good increase in momentum.

Stocks to watch

Among the stocks expected to perform better during the week are Chambal Fertiliser, SRF, Divis Lab, Dalmia Bharat, Bajaj Finserv, UPL, Marico, HDFC Bank, JSW Steel and Ultracemco.

Among the stocks that can witness further weakness is Syngene.

Cheers, 

Shishir Asthana