D-Street Ahead: The Indian stock market staged a strong comeback after three consecutive weeks of losses, closing the week with gains of nearly two per cent. Favorable global cues such as weaker US dollar and signs of a slight decline in foreign capital outflow sweetened investor’s sentiments towards equities.

Snapping its two-day winning streak, the 30-share BSE Sensex slipped 7.51 points to settle at 74,332.58. During Friday’s session, it climbed 246.34 points or 0.33 per cent to hit an intraday high of 74,586.43. However, the broader Nifty of NSE edged up 7.80 points to close at 22,552.50. During the day, the 50-share barometer rose 89 points or 0.39 per cent to hit a high of 22,633.80.

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Indian stock market’s performance last week

The NSE Nifty 50 rose 427.8 points or 1.9 per cent this week, its best in three months, while the Sensex gained 1,134.48 points or 1.6 per cent and logged its highest weekly gains since January-end. Despite the weekly gains, the benchmarks are still down 14 per cent from the record high levels hit in September 2024, hurt by slowing corporate earnings and foreign outflows.

All 13 major sectors ended the week higher, with mid-cap and small-cap stocks up 2.66 per cent and 5.5 per cent, respectively. Reliance Industries, the heaviest-weighted stock on the Nifty 50, climbed 3.3 per cent on Friday. 

The stock, which fell to a 15-month low on Monday, bounced back to end the week 4.1 per cent higher, after global brokerage firms upgraded it over attractive valuations. Metals rose 8.6 per cent to register their best week in nearly four years on hopes of more stimulus measures from China and its plans to cut steel output.

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Mahindra & Mahindra (M&M), expected to be the worst hit from a potential removal of import duty on US cars, rose 5.5 per cent last week after multiple brokerages said the move would have minimal impact on auto makers.

This week has been marked by retaliatory actions, business warnings of price hikes, and sharp fluctuations in global markets. With concerns over an escalating trade war, investors and business leaders remain on edge, closely tracking rapid developments from the Donald Trump administration.

Analysts said while the recent correction could aid bargain buying in large-caps, (prompting traders to unwind their bearish positions) where valuations have turned attractive, uncertainty will prevail in the market until clarity emerges on reciprocal tariffs.

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Sensex, Nifty, and Bank Nifty technical levels to watch

Amol Athawale, VP-Technical Research, Kotak Securities said Nifty/Sensex slipped below the crucial level of 22,000/72,800 and bounced back sharply. Technically, it has formed a reversal formation on both daily and weekly charts, supporting a further uptrend from the current levels. 

A long bullish candle on weekly charts and an uptrend continuation formation on intraday charts also supports the trend. The D-Street expert is of the view that 22,400/74,000 and 22,300/73,700 would be key support zones for positional traders. If the market succeeds in trading above these levels, it could bounce back to the 20-day SMA or 22,750/75,200. 

“Further upside may continue, potentially lifting the domestic indices up to 22,900/75,700. On the flip side, if the market falls below 22,300/73,700, the sentiment could change, and traders may prefer to exit their long positions,” said Athawale.

“From a technical perspective, Nifty 50 faces a crucial hurdle at its 20-day Exponential Moving Average (DEMA) near 22,700. A sustained move above this level, supported by banking stocks, could push the index towards the 23,200-23,400 range. However, a close below 22,250 may stall the recovery and lead to a retest of the key support zone between 21,800 and 22,000,” said Ajit Mishra – SVP, Research, Religare Broking Ltd.

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According to Puneet Singhania, Director at Master Trust Group, the Nifty 50 rebounded from its 100-week EMA at 22,051 after hitting its lowest level since mid-May 2024. This recovery follows three consecutive weeks of decline, with the index emerging from the oversold category on the RSI. 

“The immediate resistance stands at 22,700, aligning with the 21-day EMA, and a sustained move above this level could push Nifty toward 23,100. On the downside, support is placed at 22,300, and any break below this could drive the index lower toward 22,000,” said Singhania.

According to experts, the market strength was driven by a broad-based recovery, with Nifty 50 stabilizing near fair valuations, while mid and small-caps saw continued buying after recent corrections. Large caps appear well-positioned, with Nifty 50’s P/E below 20x, aligning with historical norms. 

On corporate balance sheets, a 10-12 per cent earnings growth is expected to provide stability. However, despite pullback, small and midcap valuations remain stretched, with the median small-cap P/E at 33x vs. a historical average of 20x. “Market breadth remains weak, with 10 per cent of Nifty 500 stocks trading above their 200DMA, suggesting that a full reset may take time,” said Krishna Appala, Sr. Research Analyst, Capitalmind Research.

Bank Nifty has found support at the horizontal zone of 47,800, which aligns with the 100-week EMA. Following three consecutive weeks of negative closing and a volatile trading week, the index managed to close in positive territory. However, it remains below the 21-day and 55-day EMAs. 

“The immediate resistance is placed at 48,900, coinciding with the 21-day EMA. A breakout above this level could drive the index towards 49,500. The RSI is currently at 42, indicating weak momentum. A breach below 47,800 may lead to further downside toward 47,200,” said Puneet Singhania.

Bank Nifty is currently witnessing positive consolidation. “For short-term traders, the double bottom support zone at 48,000 will act as a critical level. If it trades above this level, it could move up to the 50-day SMA, targeting 49,300 and 49,700. However, if it goes below 48,000, the uptrend would become vulnerable,” said Amol Athawale.

Ajit Mishra of Religare Broking believes in the banking sector, a decisive breakout above 49,000 on the Bank Nifty—its 20 DEMA—could provide the necessary momentum to propel the index toward the 50,000 mark.

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D-Street trading strategy for next week

Given the prevailing scenario, Ajit Mishra of Religare Broking advises investors to maintain a positive yet cautious approach. Stock selection should focus on companies demonstrating relative strength and strong upside potential. 

“The broader indices have approached their initial resistance levels, making it prudent to limit aggressive positions and avoid adding to loss-making trades at this juncture. With key global and domestic events lined up, market volatility is expected to persist. Investors should stay vigilant, track crucial data points, and make informed decisions based on emerging trends,” said Mishra.

D-Street experts noted sustaining the rally depends on earnings recovery and broader market sentiment. While large caps appear better placed, the broader market may consolidate unless earnings growth picks up. “Strong inflows into small caps in recent years have elevated valuations, making them more vulnerable to corrections if earnings do not keep pace,” said Krishna Appala.

“With volatility still low and markets not yet at full capitulation, a measured approach remains prudent—staggered large-cap allocations, selective mid-cap exposure, and caution in small caps until earnings visibility improves. Market sentiment remains fragile, and further upside may require stronger fundamental support to sustain,” said Krishna Appala of Capitalmind Research

Given the current technical structure, Puneet Singhania of Master Trust Group believes a sell-on-rise approach remains favorable, as market conditions still suggest caution despite the recent bounce. On Bank Nifty, Singhania said considering the prevailing technical setup, the preferred strategy would be to sell on a rise near resistance levels.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts, consider individual risk tolerance, and conduct thorough research before making investment decisions, as market conditions can change rapidly, and individual circumstances may vary.