The market has shown significant improvements over the last two months, driven by positive weekly data and sustained buying by domestic institutional investors. Additionally, the possibility of a pause in rate hikes by the US Federal Reserve has contributed to the market rally, despite challenges such as a poor monsoon, a strengthening dollar, higher bond yields, and surging crude oil prices.

During this week, the Nifty50 recorded a gain of 1.97 percent or 384.7 points, closing at 19,820, while the BSE Sensex increased by 1.85 percent or 1,211.75 points, closing at 66,598.91. Small and mid-cap indices continued to outperform, with the BSE Mid-cap index rising by 4 percent and the BSE Small-cap index by 2.2 percent. The BSE Large-cap index also gained 2 percent.

Vinod Nair, Head of Research at Geojit Financial Services, attributed the gradual rally in domestic indices to strong macroeconomic data, including robust GDP and PMI figures, which have painted a positive outlook for the market. Despite a mixed global trend marked by weak cues, Indian equities have remained resilient, supported by this optimistic economic outlook.

While global concerns arose due to rising crude oil prices, US jobless claims data for August, weak Chinese service PMI and trade figures, and increasing gas prices due to strikes in Australia, mid- and small-cap stocks in the broad market attracted strong buying interest. This was even the case when their valuations were relatively high. Heightened order inflows also made sectors like infrastructure and real estate particularly attractive to investors during the week.

Sectoral indices ended positively, with the BSE Realty index and BSE Capital Goods index rising by 5 percent each, the BSE Energy index adding 4.7 percent, and the BSE Power index rallying by 4.7 percent.

In this week, the BSE Small-cap index gained 2.2 percent. Several small-cap stocks, including MMTC, GTL Infrastructure, National Peroxide, Cochin Shipyard, Bombay Burmah Trading Corporation, Magadh Sugar & Energy, GMR Power, SpiceJet, Vikas WSP, Ashapura Minechem, Transformers and Rectifiers India, and Sadhana Nitrochem, recorded impressive gains of 21-50 percent.

Both the Nifty and the Sensex gained around 2 percent and outperformed most global equity markets. However, concerns about growth slowdown, higher interest rates, and valuations persisted in the Indian equity markets. Foreign institutional investors (FIIs) sold equities worth Rs 9,321.41 crore, while domestic institutional investors (DIIs) bought equities worth Rs 4,572.14 crore during the week.

Looking ahead, market participants are eagerly awaiting data on inflation and industrial production to provide further guidance. Jatin Gedia, Technical Research Analyst at Sharekhan by BNP Paribas, suggested that Nifty may consolidate in the upcoming week after reaching the upper end of the rising channel. The consolidation range is expected to be between 19850 and 19670. Daily and hourly momentum indicators have shown a positive crossover, signaling a buy opportunity. On the upside, a target of 19900 is anticipated.

Amol Athawale, Vice President - Technical Research, Kotak Securities, noted that Nifty has formed a higher bottom formation and is trading above the 50 and 20-day Simple Moving Averages (SMA), indicating a positive trend. The market has also formed a long bullish candle on weekly charts, supporting further uptrend prospects. Key support levels are identified at 19700-19650, with potential upside targets of 19900 and even 20000. A correction could occur below 19650, possibly testing the 50-day SMA or levels around 19550-19500.

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