- You can capture the upside if you follow the IT earnings catalyst.
- Banking stocks may deliver another earnings‑driven lift, but valuations are tightening.
- The pending India‑EU trade pact could become a market‑wide catalyst before the end of the month.
- Technicals show Nifty 50 teetering on its 100‑day DEMA – a decisive break could set the next direction.
- Foreign Institutional Investors (FIIs) remain net sellers, adding a headwind for broad market rallies.
You missed the IT rally because you ignored the earnings upgrade signal.
Why Infosys' Revenue Outlook Upgrade Fuels a Tech Bounce
Infosys announced an upgraded revenue growth forecast for FY26, beating the consensus by roughly 150 basis points. The surprise sparked a buying frenzy in the broader IT basket – TCS, Tech Mahindra and other peers rode the wave, propelling the Sensex up 188 points (0.23%) and the Nifty 50 up 29 points (0.11%) on Friday.
Sector‑wide, the upgrade signals a revival in export‑driven demand from the United States and Europe, where digital transformation spending is accelerating despite macro uncertainty. Historically, an Infosys earnings beat has preceded a 4‑6% rally in the Nifty IT index within the next two weeks, as seen after the 2022 Q3 results.
Definition: Revenue outlook upgrade – an upward revision to a company's projected top‑line growth, often reflecting stronger order books, pricing power, or macro tailwinds.
Banking Stocks: Earnings Momentum or Overhyped?
Parallel to the IT surge, banking shares climbed on expectations of solid Q3 earnings from ICICI Bank, HDFC Bank and a raft of public‑sector lenders. Analysts are eyeing net interest margins (NIM) that have steadied around 4.3% after a brief dip last quarter.
However, the sector faces headwinds: higher provisioning for non‑performing assets (NPAs) and a potential slowdown in loan growth if the RBI tightens policy further. Competitors like Tata Capital and Adani Enterprises have begun diversifying into wealth‑management and fintech, which could offset traditional credit‑growth constraints.
Historical context: In early 2023, a similar earnings‑driven banking rally was abruptly halted by a sudden rise in global rates, sending the Nifty down 3% in a week. The lesson – earnings momentum must be weighed against macro‑rate risk.
How the India‑EU Trade Deal Could Redefine Market Sentiment
Geopolitical chatter has shifted from the U.S.–Iran tension to the pending India‑EU free‑trade agreement, expected to be signed later this month. The pact promises reduced tariffs on high‑value goods, improved market access for services, and a clearer regulatory framework for foreign investors.
For equities, the deal could translate into a 2‑3% upside in export‑oriented sectors – IT, pharma, and specialty chemicals – as European buyers gain price competitiveness. Conversely, if negotiations stall, the market may revert to risk‑off mode, favoring safe‑haven assets like gold.
Definition: Free‑Trade Agreement (FTA) – a treaty between two or more countries to reduce or eliminate trade barriers, fostering smoother cross‑border commerce.
Technical Crossroads: Nifty 50 Near Its 100‑Day DEMA
From a chartist’s perspective, the Nifty 50 is hovering just above its 100‑day Double Exponential Moving Average (DEMA) at 25,694.35. The DEMA reacts faster to price changes than a simple moving average, making it a reliable short‑term trend gauge.
A clean break below the 100‑day DEMA could trigger a descent toward the 200‑day DEMA support around 25,150, echoing the December 2025 pullback that preceded a prolonged bear market. On the upside, breaching the 25,900–26,000 resistance band may unlock the next target near 26,200, aligning with the medium‑term bullish channel.
Bank Nifty, by contrast, remains comfortably above its 20‑day DEMA, suggesting relative strength in financials. Immediate support sits at 59,200, while the 60,500–61,200 range serves as the next upside hurdle.
Investor Playbook: Bull vs. Bear Scenarios
Bull Case
- IT earnings continue to beat expectations; Infosys, TCS and peers post double‑digit revenue growth.
- India‑EU trade pact finalizes, sparking a 2‑3% sector‑wide rally in export‑driven stocks.
- Nifty 50 closes above 26,200, confirming a breakout above the 100‑day DEMA.
- FIIs rotate from selling to buying after the trade deal reduces perceived risk.
Suggested positions: Long IT ETFs, selective banking stocks with strong NIM, and a modest exposure to EU‑linked exporters.
Bear Case
- US macro data (inflation, PMI) stays sticky, prompting a risk‑off rally in gold and safe‑haven assets.
- FII outflows exceed ₹30,000 crore, pressuring the rupee and equity valuations.
- Nifty 50 slips below the 100‑day DEMA, triggering algorithmic selling toward the 200‑day support.
- Banking earnings miss due to higher provisioning and slower loan growth.
Defensive tactics: Reduce exposure to high‑beta IT names, increase allocation to consumer staples, and consider hedging with gold or short‑term sovereign bonds.
In summary, the market’s near‑term direction hinges on three catalysts – the sustainability of the IT earnings surge, the outcome of the India‑EU trade negotiations, and whether technicals breach key moving‑average thresholds. Align your portfolio to these themes, and you’ll be positioned to capture upside while protecting against downside volatility.