- Broad indices posted a third straight week of gains, driven by a US‑India trade pact and steady foreign inflows.
- Realty, Infra, Energy and Oil & Gas led the rally, while IT plunged over 6%.
- FIIs bought ₹2,646 cr; DIIs added ₹2,892 cr, underscoring institutional confidence.
- RBI’s upgraded GDP outlook and stable inflation support medium‑term optimism.
- Technical charts show Nifty defending the 200‑day SMA, yet volatility remains high.
- Investor playbook: favor banks and energy on dips, stay clear of IT until fundamentals stabilize.
You missed the hidden risk behind this week’s market surge.
Why the Nifty’s 1.5% Surge Masks IT Weakness
The Nifty50 jumped 1.47% to close at 25,693.70, extending a three‑week rally that many investors hailed as a sign of a new bull phase. However, the index’s backbone is eroding: the Nifty IT index fell 6.3%, pulling the broader market’s momentum downwards. The slowdown stems from waning demand for traditional outsourcing services, as AI‑driven automation tools—most notably from Anthropic—reshape cost structures for global tech spenders. When a sector that contributes roughly 15% of Nifty’s market‑cap contracts, it creates a drag that can reverse gains if sentiment flips.
How the US‑India Trade Deal Fuels Real Estate and Infrastructure Gains
The newly announced trade agreement, featuring an 18% tariff reduction on a basket of goods, acted as an instant catalyst for the Nifty Realty (+3‑5%) and Nifty Infra (+3‑5%) sub‑indices. Lower tariffs improve the cost base for construction materials and boost foreign‑direct investment pipelines into smart‑city projects. Historically, trade‑related tariff cuts have preceded a 4‑6% uplift in Indian real‑estate indices within three months, as seen after the 2015 ASEAN‑India accord. Investors can thus view the current rally in these sectors as a front‑loaded benefit of the agreement, likely to sustain over the next quarter.
What RBI’s Upgraded GDP Forecast Means for Medium‑Term Investors
RBI’s upward revision of India’s GDP growth, coupled with a steady inflation outlook, provides a macro‑friendly backdrop. A higher growth projection signals stronger corporate earnings, especially for capital‑intensive industries like energy and banking. The central bank’s stance also reduces the probability of abrupt policy tightening, which has historically caused sharp equity corrections in the past two years. For a portfolio focused on earnings growth, this environment favors banks that can capture credit expansion and energy firms that stand to benefit from higher industrial demand.
Technical Landscape: Nifty Defends the 200‑Day SMA and Key Support Zones
On the weekly chart, Nifty held above its 200‑day Simple Moving Average (SMA), a classic bullish signal indicating that the market has weathered short‑term volatility. The 20‑day SMA also sits comfortably below current levels, reinforcing the upward bias. However, intraday swings remain pronounced, with the 25,400 level acting as a psychological floor. Should the index slip below 25,350, the next support lies near 25,200, a region that historically triggered a 4‑6% correction in 2022. Conversely, a clean breakout above 25,800 could open a path toward the 26,000‑26,200 zone, echoing the post‑budget rally of 2021.
Sector‑Specific Dynamics: Energy, Banking, and the Decline of PSU Banks
Energy and Oil & Gas indices posted 3‑5% gains, buoyed by higher crude prices and expectations of increased consumption as US‑Iran tensions ease. Banks, especially private‑sector players, have shown resilience, with net DII purchases of ₹2,892 cr indicating confidence in credit growth. In contrast, PSU banks lagged, falling 1.6%, reflecting concerns over asset quality and slower loan‑book expansion. Investors should therefore tilt toward private banks that exhibit higher Return on Equity (ROE) and lower non‑performing asset ratios.
Investor Playbook: Bull vs. Bear Cases
Bull Case: The trade deal sustains real‑estate and infra momentum, RBI’s growth outlook fuels earnings, and Nifty holds key technical supports. Positioning in private banks, energy majors, and select small‑cap winners (e.g., Sterlite Technologies, Avanti Feeds) could capture upside.
Bear Case: A prolonged IT slowdown, rising global risk‑off sentiment, or a breach of the 25,350 support could trigger a broader correction. In that scenario, defensive exposure to gold (despite current pressure) and high‑quality dividend payers becomes prudent, while keeping cash ready for opportunistic entries.
Actionable Strategies for the Next Four Weeks
1. Selective Longs: Add to private‑sector banks on dips below ₹1,400, and accumulate energy stocks when they retrace 3‑4%.
2. Avoid IT: Keep capital out of large‑cap IT until the sector shows a clear earnings recovery or stabilizes after AI‑related disruptions.
3. Small‑Cap Rotation: Monitor the small‑cap rally; stocks breaking out above 20‑day SMA with strong relative strength (e.g., Sterlite Technologies) merit a modest allocation.
4. Technical Guardrails: Use stop‑losses just below 25,350 for Nifty‑linked positions and 59,500 for Bank Nifty to protect against sudden reversals.
By aligning sector fundamentals with technical thresholds, investors can ride the current rally while safeguarding against the latent IT downside.