Indian Stock Market Weekly Outlook: Bullish Momentum Awaits Nifty 50’s Breakout Above 24,400....
Market Performance Snapshot:
The Indian markets recorded their longest weekly winning streak of the year, with the Nifty 50 closing just shy of the 24,400 mark. The rally was fueled by:
- Solid performance of index heavyweights such as Reliance, HDFC Bank, and TCS.
- Sustained foreign institutional investor (FII) interest.
- Hopes pinned on a stronger India-US trade and investment framework.
Despite last week's gains, profit-booking due to renewed India-Pakistan tensions after the Pahalgam attack capped the upside. However, markets appear to have absorbed the geopolitical shock, with sectoral resilience—particularly in defence and infra stocks—driving optimism.
Q4FY25 Earnings: Positive Surprises in Key Sectors:
Q4FY25 earnings have largely met or exceeded Street expectations, especially in:
- Banking: Major private banks reported double-digit loan growth and stable asset quality.
- IT: Despite muted revenue growth, cost optimization lifted margins in companies like Infosys and Tech Mahindra.
- Auto: Strong domestic demand, better operating leverage, and a favorable product mix drove Maruti, M&M, and Tata Motors’ Q4 results.
With ~70% of Nifty 50 companies having declared results, the earnings growth trend is estimated at 10–12% YoY, maintaining market valuations at relatively justifiable levels.
Institutional Activity: FIIs and DIIs in Buying Mode:
According to Moneycontrol, on May 3, 2025, domestic institutional investors (DIIs) were net buyers of ₹3,290.49 crore, while FIIs also turned net buyers with ₹2,769.81 crore invested in Indian equities. This marked a strong reversal in FII behavior, adding bullish strength to Indian bourses as they increasingly rotate out of Chinese and other EM assets.
Global Cues: All Eyes on the US Fed:
The Federal Open Market Committee (FOMC) meeting is scheduled for May 6–7, 2025, with the rate decision to be announced on May 7.
As of May 2, 2025, markets and analysts widely expect the Fed to keep the federal funds rate steady at 4.25%–4.5%, as it has been since December 2024.
In its earlier meeting, the US Fed signalled a "wait and watch" approach. Fed Chair Jerome Powell indicated that while inflation remains sticky, growth concerns and global macro fragilities warrant policy patience. This dovish tone was well received by global equities, including Indian markets.
Additionally, signs of a soft landing in the US economy and stabilizing crude oil prices are expected to support foreign flows into Indian assets.
India-Pakistan Tensions: Risk Still Lingers:
The Pahalgam terror attack introduced a brief spell of caution among investors, particularly on Friday. However, the quick market recovery suggests geopolitical risks have been internalized unless further escalation occurs.
Defence sector stocks like HAL, BEL, Paras Defence, Apollo Micro Systems and Bharat Dynamics are expected to remain in focus, with strategic deals and government procurement likely to gather pace.
Market Indicators: VIX and Valuations:
- India VIX: The volatility index remains below 18.26 suggesting complacency or strong confidence in the market's direction. Historical trends of VIX typically shows its value to be in between 15–35, with <20 indicating stability. Moderate VIX aligns with the market’s calm sentiment post-geopolitical shock.
- Nifty Total Market P/E Ratio: Currently hovering around 23.97, which is above the historical median but justified given earnings momentum and economic resilience. A breakout above 24,400 could trigger further FOMO-driven buying from retail and institutional players.
Sectoral Outlook:
- Defence: Poised for traction amid geopolitical tension and increased budget allocation.
- Banking & Financials: Healthy credit offtake and asset quality stabilization will keep the sector buoyant.
- Auto: Domestic demand recovery and export tailwinds to continue.
- IT: Stock-specific moves expected as margin pressures ease.
Technical Outlook:
On May 2, the Nifty 50 formed a spinning top candle on the daily chart, signaling indecision near the 24,400–24,590 resistance zone. The weekly chart, however, shows a strong bullish candle, reinforcing the uptrend.
The index is trading above its 50-day and 200-day simple moving averages (SMAs), with the 200-day SMA (~24,050) acting as key support.Key
Resistance: Immediate resistance lies at 24,590. A decisive close above this could target 24,800–25,000, with X posts citing 24,728 (Gann level) as a potential milestone.
Support: Strong support exists at 24,050–24,000, with a deeper base at 23,950. A break below 23,950 could lead to a pullback toward 23,800.
Pivot Points: Pivot at ~24,391, with Resistance 1 at 24,544, Resistance 2 at 24,742, Support 1 at 24,194, and Support 2 at 24,041.
Experts believe a decisive close above 24,400 could unlock the next leg of the rally toward 24,800–25,000 levels. Support remains firm near 23,950–24,000, with momentum indicators still in bullish territory.
Conclusion: With steady earnings, an expected favorable Fed stance leading to a dovish global monetary environment, strong DII and FII flows, and cooling geopolitical nerves, the Indian market may be at the cusp of another breakout.
The Nifty 50’s ability to break above 24,590 will be pivotal for unlocking the next rally toward 24,800–25,000, with firm support at 24,050–24,000. Moderate India VIX levels reflect confidence, but risks from overbought conditions, geopolitical escalation, or global macro shifts require caution.
On the other hand, the earnings momentum justifies the Nifty’s P/E ratio of ~23.97 though valuations remain above the historical median, warranting vigilance for potential corrections.
Traders and investors should keep a close eye on Nifty 50’s movement around the 24,400 mark and sector-specific action, particularly in defence and banking.
