Stock Market This Week: Will Nifty Bounce Back or Slip Further? Key Triggers for Traders and Investors

The Indian stock market ended its six-day winning run on Friday as panic selling gripped Dalal Street ahead of Jerome Powell’s much-awaited speech at the Jackson Hole Symposium. The Nifty 50 index lost 213 points to close at 24,870, while the BSE Sensex shed 693 points, finishing at 81,306. The Bank Nifty also corrected sharply, losing 606 points to close at 55,149.
Market experts believe the correction was largely a result of profit booking at elevated levels, coupled with caution ahead of Powell’s remarks. However, global cues have since improved, raising expectations of a positive start this week.

Powell’s Dovish Signal Boosts Sentiment
Fed Chair Jerome Powell delivered a clear dovish signal at the Jackson Hole Symposium, hinting that a rate cut could be imminent in 2025. By acknowledging rising risks of a weakening US job market, Powell effectively opened the door for a shift in the Fed’s monetary policy to support growth and employment.
The dovish stance has also put pressure on the US dollar and bond yields, indirectly supporting emerging markets like India.

RBI Rate Cut Buzz Gains Ground
A potential US Fed rate cut could also create space for the Reserve Bank of India (RBI) to consider a final 25 bps reduction in its upcoming monetary policy review. Analysts believe such a move would mark the end of the current easing cycle, providing fresh liquidity and boosting market sentiment.

Macro Triggers: S&P Upgrade and GST Reforms
Last week, the rally was driven by macro triggers, particularly S&P Global Ratings’ upgrade of India’s sovereign outlook. The upgrade reinforced investor confidence in the resilience of India’s economy, especially at a time when global markets remain volatile.

Sudeep Shah, Vice-President & Head of Technical and Derivatives Research, SBI Securities said, “Additionally, Prime Minister Narendra Modi’s announcement of next-generation GST reforms, expected to be rolled out by Diwali, added further momentum. These reforms aim to simplify the tax structure and reduce the burden on consumers and MSMEs, thereby supporting broader economic growth.”

Technical View: Nifty and Bank Nifty Levels
Despite strong macro cues, Nifty faced resistance at the 61.8% Fibonacci retracement level of its previous corrective phase (25,669–24,337). Friday’s decline resulted in the formation of an Evening Star candlestick pattern on daily charts, a classic bearish reversal signal.

Key Levels to watch - This Week 
Shah said, “Going forward, key support lies at the 100-day EMA in the 24,650–24,600 zone. On the upside, 25,050–25,100 will act as a crucial resistance. A breakout above or below these levels could set the next trend.”

For Bank Nifty, persistent weakness in banking stocks dragged the index to close at 55,150, down 0.35% for the week. It now trades below its 20-day and 50-day EMAs, with RSI on the verge of slipping below 40. He sees 54,800 as immediate support, while 55,600–55,700 remains the key resistance zone.

FII-DII Dynamics: Tug of War
Foreign Institutional Investors (FIIs) have been net sellers for six straight weeks, pulling out nearly Rs 25,751 crore in August after a record Rs 47,667 crore outflow in July. Despite recent upgrades and reforms, FIIs remain cautious due to global trade tensions, a strong dollar, and Powell’s earlier hawkish stance, according to Shah.

However, Domestic Institutional Investors (DIIs) continue to provide strong support, investing Rs 66,184 crore since August 1. Their inflows have helped cushion the market from deeper corrections despite heavy FII selling.

Key Sectors To Watch This Week 
The Nifty Auto Index delivered a breakout from a 13-week consolidation range, rallying more than 5% last week. With RSI crossing above 60 and the index trading above key moving averages, experts expect the sector to remain an outperformer. Stocks like M&M, Maruti, and Apollo Tyres are expected to lead the charge, according to Shah.

The Nifty Consumer Durable Index also surged nearly 4% after the GST reform announcement, forming a bullish candle on the weekly chart. Shah believes the sector will continue to benefit from rising demand as GST cuts could boost consumer spending.

Meanwhile, Nifty CPSE, PSE, and Private Banks are expected to underperform in the near term, while Healthcare, Pharma, and Tourism sectors may see continued strength.

IT Sector: Early Signs of Recovery
The Nifty IT Index managed to close above its 20-day EMA for the first time since July, signalling early signs of recovery. However, analysts caution that momentum indicators remain weak, and a decisive move above 36,000 with strong volumes is necessary to confirm a trend reversal. Stocks like Mphasis and Nykaa are on watchlists for potential upside, added Shah.

Stock Picks for the Week
Based on sectoral strength and technical patterns, analysts suggest traders keep an eye on:
Apollo Tyres (Auto)
Mphasis (IT)
Nykaa (Consumer)
RCF (Fertilisers)
Dixon (Electronics)
ABFRL (Retail)
Poonawalla Fincorp (Finance)

Global Triggers: Geopolitics and Liquidity Buzz
Beyond monetary cues, geopolitics remains a risk factor. Despite meetings between US President Donald Trump, Russian President Vladimir Putin, and Ukraine’s Volodymyr Zelensky, uncertainty continues over the Russia–Ukraine war. Any escalation could impact global oil and commodity markets, influencing Indian equities.
On the liquidity front, the expectation of a 25 bps Fed rate cut has sparked optimism worldwide, with Asian and US markets rallying. This sentiment is likely to spill over into Indian equities.

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How Should Traders Navigate Volatility?
Focus on quality stocks from outperforming sectors.
Align trades with the broader trend and avoid overtrading.
Use multi-timeframe analysis and strict stop-losses.
Wait for confirmation before entering positions.
 

“In this volatile market, traders should prioritize quality stocks, practice strict risk management, align their trades with the broader trend, avoid excessive trading, utilize multi-time frame analysis, and wait for clear price confirmation before taking positions” said Shah.

The Indian stock market enters this truncated week with a mix of caution and optimism. While global cues, Fed signals, and GST reforms provide tailwinds, technical resistance and FII caution remain challenges. The 24,600–25,100 range on Nifty will be closely watched, with sector-specific momentum offering opportunities for traders.

Disclaimer

The views expressed in this article are purely informational and Republic Media Network does not vouch for, promote or endorse any opinions stated by any third party. Stock market and Mutual Fund investments are subject to market risks and readers are advised to seek expert advice before investing in stocks, derivatives and Mutual Funds.