Market Consolidation Phase
The Indian equity market has entered a phase of consolidation, with the Nifty index oscillating within a defined range. Kranti Bathini of WealthMills Securities
observed that the Nifty is trading in a 200–300 point range, signaling a time-wise correction, particularly impacting midcap and smallcap stocks, which have seen corrections of 25–30%. This consolidation is influenced by a combination of weak global cues and persistent selling pressure from foreign investors. Despite these challenges, the market has shown resilience, supported by domestic liquidity from institutional investors and retail participants. The Nifty found support around 25,850, triggering a rebound after briefly slipping below 26,000 during the week. However, the index struggled to definitively surpass the 26,000 mark. The overall sentiment remains cautious, with buy on dips and sell on rallies being the prevalent strategy.
Global Economic Influences
Global economic factors significantly impact the Indian market's performance. The softer-than-expected US CPI print of 2.7% initially provided a sense of optimism. However, the future trajectory of the Federal Reserve’s interest rate policy will remain unclear over the next few policy meetings. Concerns are present concerning US tariff risks, the protracted effects of shutdowns, and their effects on consumption and inflation patterns. Bathini indicated that while the data offered temporary relief, the market needs confirmation through upcoming economic data. Moreover, the depreciation of the rupee, which recently touched 91 against the dollar, is a key concern for Foreign Portfolio Investors (FPIs). Currency weakness and uncertainties surrounding global trade deals continue to make foreign investors cautious. With the global markets heading into a holiday season, FPI flows and currency movements are crucial variables to monitor.
FPI Dynamics and Trends
Foreign Portfolio Investors (FPIs) continue to be net sellers, especially towards the end of the year. Historically, November and December have seen FPI profit-booking, as they tend to close positions during the fag end of the calendar year. In the previous financial year, FPIs sold nearly ₹3 lakh crore, and approximately ₹2.95 lakh crore so far this year. However, the Indian market has largely avoided a significant correction, demonstrating the maturity of the Indian markets. This resilience is attributed to the strong support from domestic institutional investors and retail participation, which have emerged as strong liquidity providers. This shift in market dynamics signifies a growing confidence in the domestic market's ability to withstand external pressures, even as foreign investors exercise caution and book profits.
Sectors to Watch
Certain sectors present promising opportunities for investors. Infrastructure stands out due to attractive valuations, ahead of higher capital expenditure in FY26–27. Defense is another sector to watch following a healthy correction and consolidation phase. The nuclear energy sector is identified as an emerging, under-penetrated theme, with India's power demand expected to increase significantly with the growth of data centers, semiconductors, and digital infrastructure. Semiconductors and data centers are also areas of focus. Banking and financial services remain core drivers in the Indian market. These sectors are positioned to benefit from long-term policy reforms and the evolving economic landscape, offering strategic investment potential.
Near-Term Market Outlook
For the near term, the market is expected to remain range-bound, oscillating between specific resistance and support levels. Resistance is seen around 26,000–26,250 on the Nifty, while support is found around 25,850. Market experts recommend buying on dips and selling on rallies, given the consolidation phase. The market's performance is sensitive to factors such as FPI flows, currency movement, and global market sentiment. Recent policy reforms, like those in the insurance and nuclear power sectors, are expected to create long-term opportunities, especially in the energy sector. These key data points will be critical for investors to monitor in the coming weeks and months, especially as the market navigates the holiday season and end-of-year dynamics.
