D-Street Ahead: How will Indian stock market move next week? Your trading strategy—key technical calls for Nifty, Sensex

D-Street Ahead: The Indian stock market witnessed a robust recovery and surged over 4.5 per cent in the holiday-shortened week, driven by favourable cues from both domestic and global fronts. The rally was fueled by optimism surrounding the deferral of tariffs and exemptions on select products, raising hopes for potential negotiations to mitigate the impact on global trade.

Domestic equity benchmarks, Sensex and Nifty 50, registered their fourth day of rally after investors turned buoyant after foreign investors returned to equities. The indices logged their best week in over four years and erased all their year-to-date losses, led by a rally in heavyweight financial stocks.

Indian stock market's performance last week

The benchmark indices opened with a sharp gap and built further on the gains in subsequent sessions. As the week progressed, market participants responded positively to a slew of favorable developments, including updates on a normal monsoon, retail inflation dipping to a nearly six-year low—which raised hopes for a third rate cut by the Reserve Bank of India (RBI)—and the absence of any major negative surprises from global markets.

As a result, both Nifty and Sensex settled near the week’s high, closing at 23,851.65 and 78,553.20, respectively. The indexes rose 4.5 per cent in the holiday-truncated week, while their major Asian peers underperformed due to the uncertainty over US tariffs and worries about their effect on economic growth.

In four days, the 30-share BSE Sensex benchmark jumped 4,706.05 points or 6.37 per cent and the NSE Nifty 50 surged 1,452.5 points or 6.48 per cent. Still, the benchmarks are down around nine per cent from their lifetime highs in late September. Investors' wealth rallied by ₹25.77 lakh crore to ₹4,19,60,046.14 crore (USD 4.90 trillion) in four trading sessions.

Last week, financial stocks rallied on the prospects of healthier net interest margins after top lenders lowered their deposit rates, following the central bank's rate cut. ICICI Bank and HDFC Bank, the heaviest-weighted stocks on the Nifty 50, soared 7.2 per cent and 5.5 per cent, respectively, to hit lifetime highs ahead of their earnings release over the weekend.

All major sectors participated in the uptrend, with realty, banking, and financials emerging as the top gainers. Other sectors also posted healthy gains. The broader indices mirrored the benchmark performance and rose over four per cent each, highlighting the rally's strength across the board.

Investors are also betting big on the upcoming southwest monsoon as, according to the India Meteorological Department, India is expected to get above-normal rainfall in the upcoming southwest monsoon season, which raised hopes for a bountiful harvest for the largely agri-based economy.

Sensex, Nifty, and Bank Nifty technical levels to watch

Technical Outlook

Technically, Nifty has been trading within 21,700–23,800 over the past two months and has reached this band's upper end. Moreover, it has reclaimed key moving averages—the 100 and 200-day EMAs. "The prevailing positive momentum is expected to continue, with a potential upside towards the 24,250–24,600 zone. In case of a dip, the 23,000–23,300 zone is likely to act as a support," said Ajit Mishra, SVP, Research, Religare Broking Ltd.

According to Vishnu Kant Upadhyay, AVP—Research & Advisory, Master Capital Services, the market is approaching a key resistance zone between 23,800 and 24,000. A breakout above this level could propel the index towards 24,800. The uptrend signals momentum and strength, backed by strong volumes and a solid RSI.

A sharp decline in the volatility index (India VIX) also signals a reduction in market fear after recent choppiness. Among the key sectors, the continued strength in the banking index has been crucial. It is now on the verge of hitting a new record high. The earnings of heavyweights like HDFC Bank and ICICI Bank are expected to provide important cues for the next market move.

"On the higher side, the Bank Nifty index could target the 55,000–57,000 zone, considering the consolidation phase over the last nine months. In case of any dip, the 51,900–53,400 zone is expected to offer strong support," said Ajit Mishra.

D-Street trading strategy for next week

Vinod Nair, Head of Research, Geojit Investments Ltd, advises investors to adopt a cautious stance, particularly with export-oriented stocks, and instead focus on pure domestic themes such as banking, consumer goods, healthcare, transportation, and infrastructure.

“A sector- and stock-specific investment strategy is anticipated in the week ahead, driven by upcoming earnings releases and subsequent management commentary, which will play a key role in shaping market sentiment,” said Nair.

Ajit Mishra of Religare Broking said, "With signals pointing to continuing the current recovery, a 'buy on dips' approach is advisable until Nifty breaches the 23,000 mark. Sector-wise, rate-sensitive segments such as banking, financials, auto, and realty remain preferred and advised to be selective in other sectors.

“Participation from the broader market is also visible, further strengthening the bullish sentiment; however, focus should be on fundamentally sound stocks, especially with earnings season underway,” added Mishra.

According to Vishnu Kant Upadhyay of Master Capital Services, buying on declines remains viable as long as the index stays above its key moving averages. However, if resistance persists at the 23,800–24,000 range and the market dips below its moving averages, the sentiment may shift towards a ‘sell on rise’ approach.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts, consider individual risk tolerance, and conduct thorough research before making investment decisions, as market conditions can change rapidly, and individual circumstances may vary.