Indian stock markets witnessed a weak trading week as benchmark indices struggled under selling pressure, especially in technology stocks. Both the Sensex and Nifty ended the week over one percent lower, reflecting cautious investor sentiment. While global uncertainties and IT sector concerns triggered the decline, several key triggers in the coming week could decide whether markets stabilise or remain volatile.
Here are seven important factors investors should closely track.
1. IT Stocks Recovery May Provide Immediate Support
Shares of major IT firms like Infosys and Wipro showed signs of recovery after heavy selling earlier in the week. Their American Depository Receipts (ADRs) rebounded following strong bargain buying at lower levels.
Since IT stocks hold significant weight in Indian indices, continued recovery in this sector could help markets regain stability. However, investor confidence remains sensitive due to fears of artificial intelligence disrupting traditional outsourcing demand.
2. US Inflation Data Brings Rate Cut Optimism
Recent inflation data from the United States has strengthened expectations of monetary easing. The Consumer Price Index rose slightly below forecasts, raising hopes that the Federal Reserve may implement interest rate cuts later this year.
Lower US interest rates typically encourage foreign investors to shift money towards emerging markets like India. Positive commentary from the White House has further boosted market sentiment. If expectations around rate cuts strengthen, Indian equities could attract renewed foreign investment inflows.
3. Foreign Investors’ Selling Trend Remains a Concern
Foreign institutional investors (FIIs) have continued to remain net sellers, impacting market momentum. According to market experts from Geojit Investments Limited, FIIs have offloaded significant equity holdings this month.
The selling intensified after a sudden global technology sector correction triggered by developments linked to Anthropic. Experts believe that FIIs could return once volatility in the IT sector subsides. Additionally, India’s strong economic outlook and government policy support may help restore long-term foreign investor confidence.
4. Rupee Movement Against the Dollar Will Influence Flows
The Indian rupee closed near record lows against the US dollar. Currency movement plays a critical role in determining foreign investment flows. A stronger dollar often encourages global investors to move funds toward safer US assets.
According to currency analysts at Enrich Money, the rupee currently remains in a consolidation phase but could weaken further if global risk sentiment deteriorates. A stable rupee, however, may support equity market stability and attract foreign inflows.
5. Technical Levels Suggest Markets Near Crucial Support
From a technical standpoint, the Nifty index has slipped below important resistance levels and is currently trading near major support zones. Analysts suggest that the index must hold above key support levels to prevent further downside.
Options data indicates a cautious and slightly bearish sentiment in the short term. Traders are likely to adopt selective buying strategies near strong support levels while closely tracking global developments and sector-specific news.
6. Upcoming US GDP Data Will Provide Global Direction
Global investors are closely monitoring upcoming US economic data, particularly GDP numbers and policy meeting minutes from the Federal Reserve. These indicators will offer clarity on future monetary policy decisions and economic health.
Indian markets often react sharply to global cues, especially when foreign portfolio flows remain volatile. Strong US economic growth could reduce rate cut expectations, while weaker data might strengthen emerging market sentiment.
7. Rising Geopolitical Tensions Add Market Uncertainty
Global geopolitical risks are also influencing investor behaviour. Reports by Reuters suggest that the United States military is preparing for potential prolonged operations involving Iran. The situation has gained attention after discussions involving US leadership under Donald Trump and diplomatic talks held in Oman.
Any escalation in Middle East tensions could impact crude oil prices and global risk appetite, which directly affects Indian equity markets.
Market Outlook
Despite recent weakness, the broader outlook for Indian equities remains supported by improving corporate earnings expectations and strong domestic economic growth. Investors are likely to remain cautious in the short term while closely tracking global economic data, currency trends, and geopolitical developments.
If IT stocks stabilise and foreign investors return to buying, markets could witness a gradual recovery. However, volatility is expected to persist, making selective and disciplined investment strategies crucial in the coming week.