After six weeks of bear dominance, bulls finally took back control of the Indian stock market this week as front-line indices closed with positive gains, bringing relief from the sustained selling pressure.
On Thursday, both benchmark indices posted only modest gains, yet still managed to close the week over 1% higher. Broader markets also ended in the green, with the Nifty Midcap 100 and Nifty Smallcap 100 advancing more than 0.70% each.
Despite overseas investors continuing to wield their selling weapon aggressively, withdrawing over ₹10,170 crore over the last four trading sessions, there was strong support from domestic institutional investors (DIIs), largely driven by mutual funds, which have continued to absorb the heavy FPI selling.
Exchange data shows that DIIs have purchased ₹19,000 crore worth of Indian equities this week, more than offsetting the FPI outflows. Overseas investors’ sentiment towards India soured after Trump imposed higher duties on Indian goods while simultaneously striking trade deals with other Asian economies, including Japan, and extending the tariff suspension on China for another 90 days.
These moves have led foreign investors to redirect their focus to those regions. However, the sharp FPI outflows have been completely offset by the DIIs; the market still couldn’t get enough momentum to scale up, indicating that Trump’s tariff hikes on Indian goods have cast a lingering shadow on market sentiment despite strong domestic buying support.
Market momentum hinges on Alaska meeting outcome
According to analysts, the reversal in market sentiment will depend on the outcome of the upcoming meeting between US President Donald Trump and Russian President Vladimir Putin in Alaska today, where discussions will center on the Ukraine conflict, and the outcome could influence tariff policy and risk sentiment.
They say that if the talks lead to an end to the Russia–Ukraine war, it may also result in the withdrawal of US sanctions on Russia and, consequently, a reconsideration of the 25% penal tariff imposed on India for buying oil from Russia.
Meanwhile, Trump warned late Wednesday that Russia would face “very severe consequences” if it refused to end the war in Ukraine, while Ukrainian President Volodymyr Zelenskiy reiterated that he would not cede the eastern Donbas region to Russia.
Treasury Secretary Scott Bessent has warned that secondary tariffs on India could be raised depending on the outcome of the meeting. Speaking to Bloomberg TV on Wednesday, Bessent said Washington had already imposed secondary tariffs on India for purchasing Russian oil, and further measures were on the table if negotiations with Moscow failed to produce results.
Trump’s initial 25% tariffs took effect last week, with an additional 25% scheduled for August 27. These tariffs came at a time when the Indian economy was striving to position itself as a global manufacturing hub and rebound from last year’s weak growth.
Several international brokerage houses have warned that such tariffs could weigh on India’s economic prospects, making the outcome of the upcoming meeting a key factor in determining the market’s direction.
Nifty 50 could see further upside if it breaks above 24,700, say analysts
Nilesh Jain, Head, Technical and Derivatives Research Analyst (Equity Research) at Centrum Broking, noted that the markets staged a strong rebound as the Nifty 50 index ended its six-week losing streak and formed a bullish candle on the weekly chart. He highlighted that the index reclaimed its 100-DMA at 24,560, which will now serve as an immediate support.
However, over the past month, the Nifty has struggled to cross its short-term 21-DMA at 24,770, and a decisive move above this level is crucial to unlock further upside towards 25,000. The RSI has turned higher to 44, indicating improving momentum, while the MACD remains below the zero line. Although sentiment has improved, Jain added, a clear confirmation of a trend reversal is still awaited.
Siddhartha Khemka, Head of Research, Wealth Management at Motilal Oswal Financial Services, pointed out that the Chinese Foreign Minister is slated to visit India on August 18 for talks under the Special Representatives (SR) mechanism, while India’s External Affairs Minister is set to visit Russia on August 21.
He further observed that, in a positive development, S&P upgraded India’s sovereign credit rating to ‘BBB’ with a stable outlook after a gap of nearly 19 years. With the end of the Q1 earnings season, Khemka said, investor focus is expected to shift towards upcoming geopolitical developments, while markets are likely to remain in a consolidation mode.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
