Dalal Street is wrapping up the Q4 FY26 earnings season on a strong note, but the positive sentiment may not spill over to the next financial year. JM Financial warned that FY27 earnings downgrades warrants caution as it believes the expectations are likely to remain skewed on the downside against the backdrop of elevated crude oil prices, potential inflationary pressures and rising external uncertainties.

In its latest ‘Strategy’ note, JM Financial highlighted that at the beginning of FY25, the consensus expectation for Nifty 50 EPS growth stood at 15%. However, the actual growth came in at only 3.4%. Similarly, at the beginning of FY26, FY26, earnings were expected to grow 12–15%, whereas actual growth was only 4.5%.

“While Q4 FY26 results have led to an upward revision in our FY27E Nifty 50 EPS growth forecast to 17.1%, the recent track record of earnings downgrades warrants caution,” it said. The domestic brokerage listed out sectors which it expects to do the “heavy lifting” in earnings. These include automobiles (55% YoY growth, 7% weight in Nifty 50 PAT), metals and mining (36% YoY growth, 6% weight in Nifty 50 PAT), NBFC (32% YoY growth, 4.3% weight in Nifty 50 PAT), telecom (44% YoY growth, 3.3% weight in Nifty 50 PAT), and infrastructure (19% YoY growth, 3.2% weight in Nifty 50 PAT). “Private banks with a 31.2% weight in the Nifty 50 and expectations of 13% growth in FY27E form the backbone of this expectation,” it added.

Q4 earnings review

JM Financial highlighted that Nifty 50 EPS growth of 4.4% YoY in Q4 FY26 stood broadly in line with expectations. Excluding financials, earnings growth stood at 1.4% YoY. It highlighted that aviation was the worst performer, with EPS falling nearly 175% YoY. The sectors that instead notched up the highest EPS growth included internet (346%), telecom (38%), cement (32%), consumer retail (28%), utilities (26%), and automobiles (26%).

“Out of the 50 companies in the Nifty50, 32% missed estimates in Q4, whereas 40% beat estimates. Furthermore, if we split the Q4FY26 performance by market cap, we see that the proportion of misses was the largest in small-caps, followed by large-caps and then mid-caps; 33% of small-cap companies missed expectations while the misses were fewer in mid-caps and large-caps at 18% and 29%, respectively,” it added.

For the entire financial year which ended on March 31, 2026, JM Financial said that is had estimated FY26 EPS would grow 12% YoY, but actual growth came in at 4.5% YoY as earnings expectations steadily weakened through the year. “While part of this divergence reflects the impact of Nifty 50 reconstitution during FY26, earnings underperformance across sectors relative to their initial expectations was also a noteworthy factor,” it added.

Which sectors underperformed in FY26?

Key sectors that underperformed in FY26 when compared to their initial PAT growth expectations, according to the domestic brokerage, are banks (3.6% YoY growth vs expectation of 7.1% growth), automobiles (17.5% YoY fall vs expectation of 4.9% growth), pharmaceuticals (9.7% YoY fall vs expectation of 18.8% growth), and consumer (10.4% YoY growth vs expectation of 13.8%).

While automobiles, metals, NBFC, telecom and infrastructure are expected to lift up FY27 earnings, JM Financial estimates SOE banks, utilities and consumer to drag FY27 Nifty 50 EPS.

Also Read | Motilal Oswal highlights broad-based beat on Q4 estimates, lists 6 sectors that exceeded expectations

Indian stock market staged a sharp recovery, with Sensex and Nifty erasing morning losses to snap a four-session losing streak, led by a strong surge in IT stocks including heavyweight TCS, Infosys, HCL Tech and Tech Mahindra.

Sensex jumped 383 points to close at 74,650, while Nifty 50 gained 101 points to end the session at 23,484. This came as India VIX, which measures volatility in markets, tumbled more than 7% to 15.32.

TCS shares rallied nearly 7% to lead gains on Sensex, while Infosys shares jumped more than 5%. HCL Technologies shares meanwhile surged over 4%. On the other hand, NTPC, Axis Bank, Power Grid, Bajaj Finserv and others fell up to 3% to lead losses.

The optimism was broad-based, with Nifty Midcap 100 and Nifty Smallcap 100 indices also closing in the green. Sectorally, Nifty IT led gains with a 4% jump. Nifty Pharma meanwhile fell around 1%. Nearly 2,034 stocks advanced on NSE, while 1,285 declined and 107 remained unchanged.

“Markets recovered from initial losses, led by gains in the IT sector, while continued accumulation in large-cap stocks reflected comfort with valuations, as the Nifty 50 trades closer to its long-term averages than the relatively richer valuations in broader markets,” said Vinod Nair, Head of Research, Geojit Investments. He added that despite ongoing delays in a Middle East truce, global sentiment remained stable, highlighting resilience in risk appetite. With the earnings season largely concluded, investor focus has shifted to key macro factors including monsoon progress, inflation trends, RBI policy, and liquidity conditions, he added.

“The monsoon is expected to advance into southern regions this week, providing near-term sentiment support. While rainfall is projected to be below the long-period average and emerging El Nino risks warrant monitoring, healthy reservoir levels, well above the 10-year average, offer a cushion against potential shortfalls,” according to Nair.

The sharp optimism on Dalal Street came as global stocks rallied, buoyed by fresh AI optimism after Anthropic moved towards a US stock market listing, while oil prices and bond yields fell on renewed hopes of a US-Iran deal. Brent crude futures dropped more than 1% to $94 a barrel after US President Donald Trump said talks with Iran were ongoing.Anthropic on Monday said it has confidentially filed for a US initial public offering.. Google parent Alphabet is also seeking to raise $80 billion in equity to fund the expansion of its AI infrastructure.

Foreign investors meanwhile remained net sellers of Indian equities, net selling shares worth nearly Rs 3,912 crore on Dalal Street on Monday. This came after a massive Rs 22,102 crore selloff in just one session on May 29.

Notably, South Korea’s equity market has overtaken India’s as the world’s sixth largest, driven by a relentless surge in chip heavyweights powering the global artificial intelligence buildout.

(With inputs from agencies)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

In December 2023, the Nifty 50 index in India made a new high at 21731 for the first time and touched an intramonth high of 21801. At the end of March 2026, we are very close to that level. Many stocks, especially in the broader market, are below the December 2023 level.

To get a sense of the word on the street, I spoke to a few of my friends who have been investing professionally since the early 2000s. The response was unanimous: “I don’t know where the markets will bottom. I haven’t seen anything like this earlier.”

Those who were looking to take advantage of the fall during the first leg of the crash rescinded their views and wanted to wait longer before deploying their funds. Their statements surprised me. I wondered how someone who has been an investor for more than 20 years has not seen anything like this before. The past two decades, especially, have seen a high share of volatility and crashes.

Certainly, they have also read about the market crashes that happened in the last century. I agree this correction may not be exactly the same as the previous ones, but as Mark Twain said, “History doesn’t repeat, but it does rhyme.”

To make superior returns in the market, an intelligent investor is greedy when others are fearful. But what stops us from doing what an intelligent investor must do?

Biases that hold us back from taking advantage of this fall are myopic loss aversion and recency bias. In this note, I will talk about a psychological concept that affects even highly experienced investors. I present a hypothesis, based on the concept of ‘Two Selves’ given by Nobel Prize winner Daniel Kahneman, to explain why people feel “this time it’s different.”

THE TWO SELVES

Daniel Kahneman is the first psychologist to win a Nobel Prize for economics. In his book, Thinking, Fast and Slow, he talks about how there are two selves in everyone—a ‘Remembering Self’ and an ‘Experiencing Self’. He explains it with an example. One of his students approached him at the end of a lecture and told him about a symphony he had been listening to. “It was absolutely glorious music and at the very end of the recording, there was a dreadful screeching sound.” And then he added, quite emotionally, “It ruined the whole experience.” According to Kahneman, the student’s experience was not ruined; it was the memory of the experience that was ruined. Although the student enjoyed those 20 minutes of good music, that experience did not count because he was left with a bad memory of it.

The ‘experiencing self’ lives in the present. It is the ‘experiencing self’ that the doctor approaches when she asks, “Does it hurt now?” The ‘remembering self’ is the one that keeps score and maintains the story of our life, and it is the one that answers when the doctor asks, “How have you been feeling lately?” The ‘experiencing self’ lives moment to moment, but not all those experiences make it to memory. The ‘remembering self’ is a storyteller and keeps what we derive from our experiences.

There are many areas where this concept of two selves applies. Patients tend to have better memories of surgery if the pain recedes towards the end rather than if it ends with peak pain. Take the case of parenting: parents generally have a very good memory of raising their children. However, their day-to-day experience of raising them may not be very pleasant. How about holidays? If you had a great holiday but it ends with you losing your passport and wallet, the ‘remembering self’ will paint the story with quite a bit of pain.

HOW IS THIS ALL RELEVANT TO THE MARKETS?

Here is my hypothesis: a lot of investors have experienced investing during crashes in the past. They carry a memory of how crises are an opportunity to increase allocation towards equity markets, and how, ultimately, they make great returns when the markets bounce back. At the onset of every new crash, these investors recall those memories. The ‘remembering self’ recites to them the story of how profitable investing during bad times is.

However, the ‘remembering self’ has not captured all the moments of the past. The ‘experiencing self’ went through every moment of fear, agony, and anxiety that comes with contrarian investing during previous crashes. But most of these moments are lost, and only the happy endings dominate the story.

During the current market fall, the ‘experiencing self’ is living the pain of a contrarian stance every day. And within a few days of the fall, one feels things are different from what the ‘remembering self’ narrated. “This time it’s different!” Although investors undergo the same fear and pain during every large down move, the story feels different. They are likely to feel that conditions were better the last time. The phenomenon is true for raging bull markets too. Even though investors carry the scars of participating in past bubbles, they are pulled into a new one with the catchphrase, “this time it’s different.”

Every few years, the markets correct and many investors end up selling close to the bottom due to fear and panic. The proverbial market pendulum swings towards extreme pessimism. With the right temperament, an intelligent investor can take advantage of these cycles. True, one cannot catch the exact bottom or top. Staggering investments during such times through SIPs or STPs can help mitigate near-term volatility risk while ensuring participation across cycles.

Happy Investing!

(Source: NSE Indices)

(The author of the article is Nimesh Chandan, CIO, Bajaj Finserv Asset Management Limited)

India’s beaten-up equities are widening their underperformance against global peers, as escalating tensions in the Middle East push oil prices higher and hurt importers, strategists say.

Indian companies may be among the most impacted in Asia by the Iran war, according to Goldman Sachs, which estimates a 20% rise in the price of Brent crude would cut regional earnings by 2%. Societe Generale expects India’s underperformance to deepen given its high dependency on imported energy, while Natixis labels the country’s assets “most at risk” for the same reason.

Local shares tumbled in on Wednesday as trading resumed after a holiday, with benchmark NSE Nifty 50 Index slipping as much as 2%, taking its slump this year close to 7%. India’s rupee weakened to a record low and bonds fell on concern about rising crude prices. A gauge of 30-day ahead volatility jumped above 20 to its highest level since May 12.

India’s $5 trillion equity market has lagged most major peers since late 2024, on weaker earnings growth and lack of exposure to artificial intelligence-related shares. The surge in the price of oil — the country’s top import — has dampened a nascent recovery in stocks since India’s trade deal with the US. Analysts expect it to drive inflation, and weaken the economy and currency.

“With Middle East tensions showing little sign of easing, supply risks remain high, leaving room for oil prices to move higher in the near term,” said Dilin Wu, a research strategist at Pepperstone Group. “India’s heavy reliance on imported crude — most of it from the Gulf — makes its market vulnerable. Prolonged higher oil prices could widen the import bill, strain the current account and rupee, and put additional pressure on equities.”

The jump in Brent prices has pressured the Nifty Index in recent sessions and analysts expect such weakness may continue for some time. On Wednesday, bank shares weighed the most on the key gauge while engineering major Larsen & Toubro, which has significant exposure to the Middle East, dropped 7%.

The start of the Russia-Ukraine war resulted in the Nifty correcting by around 10% in the first half of 2022, Citigroup analysts including Samiran Chakraborty wrote in a note. “A 10% rise in oil prices leads to 30 basis points of upside pressure on inflation and 15 basis points downside on growth,” they said. To be sure, some investors are more optimistic about India. BNP Paribas says Indian stocks should outperform in coming months as the risk/reward balance is skewed to the upside.

Still, more investors are seeking alternatives to Indian stocks. SocGen recommends going long Asia ex-Japan shares while shorting those from India, while Sanford C. Bernstein expects a drawn-out Iran conflict may continue to depress the index from its Monday close of 24,866.

A more prolonged escalation “could push the Nifty below 24,500,” Bernstein analysts including Venugopal Garre wrote in a note. “In particular, we see higher risk for energy, travel and trade-linked names, and construction companies with meaningful Middle East and North Africa exposure.”

Indian benchmark indices closed sharply lower on Friday, dragged down by broad-based selling across sectors. Consumer, IT, and energy stocks were among the biggest laggards.

The Nifty settled at 25,471.10, down 336 points or 1.30%, while the BSE Sensex tumbled 1,048.16 points, or 1.25%, to close at 82,626.76.

The volatility gauge, India VIX, ended at 11.73, down 1.53% from the previous close.

Analysts’ Take

Nilesh Jain, Vice President – Head of Technical & Derivative Research at Centrum Finverse, said the Nifty opened with a gap-down and slipped below its key 21-, 50-, and 100-day moving averages, placed at 25,480, 25,770, and 25,690, respectively.

The index is attempting to fill last week’s downside gap, and the crucial support at the 200-DMA near 25,300 is likely to be tested in the near term, Jain added.

“India VIX had surged sharply earlier to around 13, and any further rise in volatility could be a cause for concern. Overall, the market structure appears sideways to weak, and pullback rallies are likely to face selling pressure as long as the Nifty remains below 25,800,” he said.

European Markets

Most major European indices were trading broadly positive around 2:07 p.m. GMT (7:52 p.m. IST). Germany’s DAX was higher, while France’s CAC 40, the Stoxx 600, and the UK’s FTSE 100 were also trading in the green. Spain’s IBEX, however, was marginally lower.

Tech View

Rupak De, Senior Technical Analyst at LKP Securities, said India VIX has moved back above its 200-DMA, indicating rising caution among market participants.

From a technical perspective, the setup has turned relatively cautious, with the index slipping below its 20-DMA for the first time in recent sessions. He added that the Nifty has breached the 38.2% Fibonacci retracement of the prior upward move from 24,571 to 26,341.

“With the index closing below the key support level of 25,500, the near-term bias appears weak, with potential for a decline toward 25,000 in the short term. On the upside, immediate resistance is seen around 25,800,” he said.

Most Active Stocks (Value)

Bajaj Finance (Rs 591 crore), Infosys (Rs 377 crore), HDFC Bank (Rs 375 crore), Larsen & Toubro (Rs 222 crore), TCS (Rs 211 crore), HCL Technologies (Rs 194 crore), and Reliance Industries (Rs 144 crore) were among the most active stocks on the BSE in value terms.

Most Active Stocks (Volume)

SpiceJet (4.86 crore shares), Vodafone Idea (3.59 crore shares), YES Bank (78.48 lakh shares), Suzlon Energy (66.30 lakh shares), Bajaj Finance (58.42 lakh shares), Eternal (44.23 lakh shares), and Ola Electric (43.51 lakh shares) were among the most actively traded stocks in volume terms on the BSE

Stocks Showing Buying Interest

Bajaj Finance, Lenskart Solutions, Engineers India (EIL), GE Power India, Universus Photo Imagings, Repro India, Laxmi Cotspin, and Anmol India witnessed notable buying interest.

52-Week High/Low

A total of 83 stocks hit their 52-week highs, while 193 slipped to 52-week lows. Stocks touching fresh highs included Apex, Avanti Feeds, Bharat Forge, Eicher Motors, Jamna Auto Industries, Lenskart, and Sharda Cropchem.

Stocks Seeing Selling Pressure

Among large-cap names, HDFC Bank, Reliance Industries, and ICICI Bank saw significant selling pressure. Other laggards included SpiceJet, Hindustan Unilever, Hindalco Industries, Eternal, Adani Enterprises, Crown Lifters, Muthoot Finance, and ONGC.

Market Breadth

Heavyweights such as HDFC Bank, Reliance Industries, ICICI Bank, and Hindustan Unilever weighed on the indices. Market breadth remained negative. Of the 4,364 stocks traded on the BSE, 1,253 advanced, 2,960 declined, and 151 remained unchanged.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

The markets traded in a relatively narrower range through the week with a clear negative bias and ended lower. After opening near the higher end of the range, Nifty attempted an early push toward 26,009 but failed to sustain the move and gradually drifted lower. Selling pressure intensified toward the latter half, dragging the index to an intra-week low of 25,444 before settling near the lower end of the range.

The index oscillated within a 565-point band. India VIX rose sharply by 11.33% to 13.29, reflecting a pickup in volatility and some nervousness creeping back into the system. Nifty ended the week with a net loss of 222.60 points (-0.87%).

The broader structure continues to show a market that is in a medium-term uptrend but currently undergoing a corrective phase within that trend. On the weekly chart, Nifty has slipped below its 20-week moving average (25,728) and is hovering above the 50-week MA (24,931), placing it in a critical intermediate support zone.

The price action over the past several weeks resembles a mild distribution phase near the recent highs, and the index is now testing the lower boundary of the falling trend line. The 24,900–24,950 zone remains a major support area on a closing basis; a sustained breach below this band could open the door for a deeper retracement toward the 24,350–24,400 region. On the upside, only a decisive move back above 25,800–26,000 would negate the immediate weakness and restore directional strength.

For the coming week, the markets are likely to see a cautious and potentially volatile start given the rise in VIX and the index closing near its weekly low. Immediate resistance levels are placed at 25,728 (20-week MA) and 26,000. Key supports come in at 25100 and 24,950. The weekly RSI stands at 50.17, having slipped below its recent peaks and now sitting in neutral territory; there is no visible bullish or bearish divergence against price at this point. The weekly MACD remains above the zero line but is below its signal line, indicating a loss of upward momentum. The latest candle is a bearish body following a phase of hesitation near the highs, hinting at growing supply at elevated levels.

From a pattern perspective, the index appears to be forming a short-term topping structure after failing to sustain above the recent highs. The inability to hold above the upper Bollinger Band and the subsequent drift toward the middle band reflect waning momentum. The 50-week MA at 24,931 and the 100-week MA at 24,359 form a layered support cluster below current levels, while the 200-week MA continues to slope upward, underscoring that the long-term trend remains intact despite near-term pressure.

Given this setup, a measured and stock-specific approach is advisable. Traders should avoid aggressive fresh longs until the index either reclaims 25,800 decisively or retests and stabilizes around the 24,900–24,950 support zone. Protection of existing gains should take precedence over chasing momentum. The coming week demands disciplined risk management and selective participation rather than broad-based aggressive positioning.In our look at Relative Rotation Graphs®, we compared various sectors against the CNX500 (NIFTY 500 Index), representing over 95% of the free-float market cap of all the listed stocks.

Relative Rotation Graphs (RRG) show that the Nifty PSE Sector Index has rolled inside the leading quadrant. Besides this, even IT index is inside the leading quadrant, but is seen rapidly giving up on its relative momentum. The other sector Indices that are inside the leading quadrant are Services Sector, Bank Nifty, PSU Bank, Metal, and Financial Services Indices. These groups may relatively outperform the broader
markets.

The Auto and the Midcap 100 Index are inside the weakening quadrant. The Infrastructure Index is also inside this quadrant but it is improving on its relative momentum.

The Nifty Pharma Index has rolled inside the lagging quadrant. While the FMCG Index languishes inside the lagging quadrant, the Realty Index is seen improving its relative momentum.

The Media and the Energy Indices are placed inside the improving quadrant. Important Note: RRGTM chartsshow the relative strength and momentum of a group of stocks. In the above Chart, they show relative performance against NIFTY500 Index (Broader Markets) and should not be used directly as buy or sell signals.

Indian stock exchanges, BSE and NSE, will remain shut today, January 15, in view of the municipal corporation elections being held across Maharashtra. Trading across all segments, including equities, equity derivatives, commodity derivatives, and electronic gold receipts, will remain suspended for the day.

Both exchanges issued revised circulars confirming the trading holiday. The BSE clarified that equity derivatives contracts originally scheduled to expire on January 15, were revised to expire a day earlier, on January 14.

NSE too updated its earlier stance, designating January 15 as a full trading holiday in the capital market and F&O segment.

This marks a revision from earlier communication last week, where the day was only classified as a settlement holiday, usually implying that trading would continue while settlements pause due to banking operations.

However, with banks in Maharashtra expected to remain closed today due to the civic polls, both stock exchanges revised their position to a full holiday.

Meanwhile, commodity trading on the Multi-Commodity Exchange (MCX) will be partially operational. As per a circular issued, the exchange will remain shut for the morning session (9:00 AM to 5:00 PM) due to polling.

Trading in bullion contracts like gold and silver will commence only in the evening session, which operates from 5:00 PM to 11:55 PM. For select agricultural commodities, the session will be limited to 9:00 PM.MCX typically runs on a two-session schedule: a morning session from 9:00 AM to 5:00 PM and an evening session from 5:00 PM to 11:30 PM (extended to 11:55 PM during U.S. daylight saving time). The evening session aligns with global commodity markets, covering contracts like gold, silver, and crude oil. Today, only this evening session will be functional.

Upcoming Stock Market Holidays in 2026
With today’s closure, Indian stock exchanges will now observe 16 trading holidays in 2026, excluding weekends. The next market holiday will fall on January 26 for Republic Day.

Other key holidays in the first half include Holi (March 3), Ram Navami (March 26), Mahavir Jayanti (March 31), and Good Friday (April 3). Markets will also be shut on Ambedkar Jayanti (April 14), Maharashtra Day (May 1), and Bakri Id (May 28).

In the latter half of the year, trading will pause on Muharram (June 26), Ganesh Chaturthi (September 14), Gandhi Jayanti (October 2), Dussehra (October 20), Diwali Balipratipada (November 10), and Guru Nanak Jayanti (November 24). The year will end with a final trading holiday on Christmas (December 25).

Additionally, if the Union Budget is scheduled for February 1, which falls on a Sunday this year, exchanges may open trading for that day. An official update on this is awaited.

August 15, Independence Day, has not been listed as an official holiday in the stock market calendar as the day falls on a Saturday.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

The markets saw a week of mild corrective movement as Nifty traded in a slightly downward-biased consolidation phase and ended the week on a negative note. The index oscillated in a 485-point range, between 26,178.70 and 25,693.25.

Despite a supportive backdrop from the Fed with a 0.25% rate cut, and breadth deterioration pausing, the index faced resistance near recent highs. India VIX declined by -2.01% to 10.11, reflecting continued complacency and low hedging demand. Nifty ended the week with a mild loss of 139.50 points or -0.53%.

The broader structure of the Nifty remains bullish, yet the index is navigating a key inflection zone. It continues to hover above the falling trendline, encountering resistance near 26,150–26,200. The ongoing price action reflects hesitation in decisively clearing this resistance.

The absence of clear catalysts, such as the unresolved US-India trade deal, adds to the inertia. That said, the Fed’s dovish stance could provide medium-term tailwinds, but for now, the index appears to be in a technical pause within an established uptrend. A decisive move above 26,200 will be needed to confirm a fresh breakout and extend the trend.

Given the current setup, the coming week may see a cautious-to-flat start. Initial resistance lies at 26,200 and 26,300, followed by a stronger barrier near 26,550, the upper Bollinger band. On the downside, immediate support is at 25,750, followed by the 25,600 zone.

The weekly RSI is at 61.34; it remains in the bullish zone and shows no divergence against price, indicating a neutral momentum bias. The MACD is above its signal line and continues to maintain a positive crossover. The latest candle is a small-bodied bearish candle with a moderately longer lower shadow near resistance, hinting at indecision or short-term exhaustion.

From a pattern perspective, Nifty remains above the symmetrical triangle that it has broken out of. The Index is seeing a little loss of strength while it consolidates above its breakout point and just below its high point. While such loss of strength and consolidation near resistance traditionally carries bearish implications, its upper boundary is being tested repeatedly, which also reflects strength. The index trades well above all key moving averages (20, 50, 100, 200-week), indicating that the larger trend remains intact and upward, but a clean breakout above the wedge is still awaited.

In light of the technical and macro setup, traders should remain moderately cautious. It is advisable to protect profits at higher levels and avoid aggressive long exposures until a breakout above 26,200–26,300 is confirmed. A stock-specific approach, with an emphasis on relative strength and risk management, is preferred. The method to approach the coming week should be defensive, selective, and responsive to any breakout confirmation.

In our look at Relative Rotation Graphs®, we compared various sectors against the CNX500 (NIFTY 500 Index), representing over 95% of the free-float market cap of all the listed stocks.

Relative Rotation Graphs (RRG) show that the Nifty Financial Services and the Midcap 100 Indices have rolled inside the leading quadrant. The Nifty Bank, Infrastructure, and PSU Bank Indices are also inside the leading quadrant. These groups are set to outperform the broader markets relatively.
The Nifty Metal and Auto Indices are inside the weakening quadrant. While stock-specific performance from these sectors cannot be ruled out, their relative performance may slow down a bit.

The Nifty PSE, Commodities, and Energy Indices have rolled back inside the lagging quadrant. Along with them, the Media, Consumption, and FMCG are also placed inside this quadrant. They are expected to relatively underperform the broader markets.

The Realty, IT, and Services Sector Indices are inside the improving quadrant.

Important Note: RRGTM charts show the relative strength and momentum of a group of stocks. In the above Chart, they show relative performance against NIFTY500 Index (Broader Markets) and should not be used directly as buy or sell signals.

Indian equities briefly touched fresh highs last month, but the move failed to inspire confidence. The Nifty 50 hit a record 26,325 before slipping almost 600 points in a swift reversal, raising questions over why markets appear fatigued near peak levels despite strong macro data and steady domestic flows. The retreat comes after a year in which the index overcame a 17% drawdown from its September 2024 highs to finish 2025 near new peaks, even as midcaps and smallcaps delivered a far weaker showing.

Much of the hesitation at the top is tied to the shifting market structure. Gains this year have been driven almost entirely by largecaps, analysts say, supported by domestic institutional inflows. Smaller companies never recovered fully from the drawdown. The BSE Smallcap Index remains about 10% below its all-time high and midcaps are still 3.5% off recent peaks.

With breadth weak and global cues mixed, here’s why the index’s latest breakout lacked the depth typically associated with sustained rallies and signals worrying signs for investors

Slow progress in US-India trade deal

Puneet Singhania of Master Trust Group pointed to the slow progress of the India–US trade discussions, adding that rupee weakness and persistent FII outflows continue to reduce foreign participation at higher levels.

In August, US President Donald Trump doubled tariffs on imports from India to as much as 50%, hitting exports of textiles, chemicals and food items such as shrimp. Exports to the US fell nearly 9% year-on-year in October to $6.31 billion from $6.91 billion a year ago, though they were higher than $5.47 billion in September, according to government data.

Also Read: Gold prices rise above Rs 1.3 lakh, silver hits fresh peak after US Fed cuts rates. What should investors do?

VK Vijaykumar of Geojit Investments said that the excessive delay in the India–US trade deal and comments by President Trump about taking action on India for “dumping rice” have also hurt sentiment post the record rally.

FII short build up

Analysts note the index derivatives positioning shows FIIs building significant short positions, turning the 26,000-26,250 zone into a major hurdle. Until these shorts unwind, the momentum is likely to remain capped.

Foreign ownership of Indian equities is now at a 13-year low, and a lack of buying at the top has created a ceiling for the Nifty despite strong domestic inflows. According to Ashwini Shami of OmniScience Capital, FIIs sold about Rs 15,000 crore in November and early December alone.

“This has put pressure on the index. Steep rupee depreciation recently in the face of India-US trade deal uncertainties and a growing current account deficit has likely added to FIIs’ selling,” he said.

Rupee uncertainty

The currency has been another catalyst. The rupee’s slide to near 90 against the dollar has intensified concerns around imported inflation and fund outflows. “USD-INR has hit a record low near 90, indicating currency stress and reducing risk appetite for foreign investors,” said Drumil Vithlani of Bonanza.

Technical factors

Technical indicators reflect this uneasy equilibrium. Nifty broke below its short-term trendline support and the 20-day moving average, but simultaneously found support at the 50-day moving average and the 61.8% Fibonacci retracement of its latest upmove. “Nifty may now consolidate within a broader 25,700–26,000 band ahead of the key Fed policy outcome,” said Rajesh Bhosale of Angel One.

Read More: US Fed delivers 3rd rate cut in a row. What does it mean for Indian equities?

A decisive move above 26,200-26,300 could revive sentiment, while a breakdown below 25,700 risks a deeper correction, he added.

Broader market unsupportive

The broader context explains why the rally feels fragile. Profit-taking has been sharper in small and midcaps after two years of strong gains. Stretched valuations, patchy earnings and thin liquidity in the broader market have kept bargain-hunters on the sidelines. According to Vijayakumar, valuations outside largecaps had been “kept high only on the strength of liquidity,” an unsustainable dynamic that is now unwinding.

What’s next from here?

Analysts say fundamentals may soon tilt back in favour of the bulls. Corporate earnings have shown early signs of stabilisation. Citi noted that the top 100 companies delivered 12% profit growth in the September quarter, slightly ahead of expectations and the first quarter in several without an earnings downgrade cycle.

Macro indicators — higher real growth, improving nominal GDP and policy support through rate cuts and GST rationalisation — are expected to strengthen consumption and credit trends into 2026.

Large-caps also offer better value now relative to history. “Valuations in the largecap segment have become fair,” said Vijayakumar. He expects the market to resume tracking fundamentals as inflation rises from unusually low levels and boosts nominal earnings growth.

Global brokerages including, Morgan Stanley and Goldman Sachs, also expect Indian equities to recover lost breadth next year as earnings stabilise and policy measures filter through.

Kotak Securities projects Nifty reaching 29,120 by December 2026 under its base case, assuming steady earnings growth of 17.6% in FY27 and 14.8% in FY28. Its bull case projects 32,032.

Also read: US Fed delivers 3rd rate cut in a row. What does it mean for Indian equities?

Near-term uncertainty, however, is likely to persist. Investors are watching the progress of the India-US trade negotiations and the rupee’s trajectory. Foreign flows remain the swing factor, and the lack of conviction at the top reflects unease about whether the rally can sustain without FII support.

“Investors prefer waiting for clarity from inflation data, the upcoming Budget, and Q3 earnings. Until flows stabilise and earnings visibility improves, the index is likely to stay choppy — a clear sign that the rally lacks strong conviction,” said Ishan Tanna of Ashika Equity Research

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

Indian equities surged to a 52-week high Monday, with the Nifty 50 just a percentage point away from its record high, as broad-based buying ahead of Diwali boosted risk assets that have had a rather circumspect run over the trailing 12 months.

The Nifty benchmark closed above 25,800, coming within 75 points of 26,000 during the day, and gaining about 4% in a year. The all-time high for the gauge is 26,277, recorded on September 27 last year. The Sensex climbed more than 400 points Monday.

The customary Diwali Muhurat trading on the bourses is scheduled for Tuesday afternoon.

The Nifty’s advance was driven not by one or two pockets alone, but by a strong showing from public-sector banks and IT stocks, which led a market rally underpinned by positive sentiment domestically and decent global cues.

“As the festive spirit of Diwali fills the air with optimism and celebration, the Indian equity markets have mirrored the mood with a strong start to the week,” said Sudeep Shah, Head – Technical Research & Derivatives at SBI Securities.

The BSE Sensex climbed 411.2 points, or 0.5%, to close at 84,363. The NSE Nifty-50 edged 133.3 points, or 0.5%, ending at 25,843. Intraday Nifty hit a 52-week high of 25,926.2.Beyond the auto index that lagged, virtually all sectoral indices posted gains. In particular, the Nifty PSU Bank and Nifty Oil & Gas indices emerged as the top performers, indicating that institutional money is rotating into financials, especially state-run lenders.The PSU Bank index surged nearly 3%, while the Nifty Oil & Gas and Nifty IT gauges advanced 1.4% and 1%, respectively.

The Volatility Index or VIX-the market’s fear measure-plunged 2.32% to 11.36, in line with the rise in indices, indicating options traders see lower risks in the near term.

The broader market also went up marginally, with Nifty Midcap 150 jumping 0.6% and the Nifty Smallcap 250 gaining 0.5%.

Of the 4,464 stocks traded on the BSE, 2,447 advanced, while 1,835 declined.

“The market’s strength was underpinned by upbeat quarterly results from heavyweights such as Reliance, HDFC Bank, and ICICI Bank, along with expectations of sustained foreign inflows amid improving global risk sentiment,” said Ajit Mishra, Senior Vice President-Research at Religare Broking.

However, Mishra advised caution given the quick pace of the recent rally.

“As the Nifty approaches the 26,000 mark, some consolidation cannot be ruled out before a fresh breakout; however, the overall bias remains positive, with immediate support around 25,650 and major support near 25,450,” he said.

He recommended a “buy on dips” approach, focusing on large-cap and quality midcap stocks.

From a technical perspective, Nilesh Jain, Head of Technical & Derivatives Research at Centrum Broking, believes a brief pause in the uptrend may be possible. “At current levels, the risk-reward ratio appears unfavourable for fresh entries, hence buying on dips would be a prudent strategy.”