Sensex, Nifty Log Weekly Gain On Tax Cut Boost: What Should Be Your Trading Strategy Now?
Domestic equity benchmarks Sensex and Nifty 50 edged lower by 1% on Friday, August 22, and snapped a six-day winning streak due to selling pressure by market heavyweights HDFC Bank and Reliance Industries. Yet, the frontline indices logged a weekly gain driven by Nifty Auto and consumer durables over expectations of GST rate cuts.
Weekly Market Performance
In the six-day rally to Thursday, the BSE benchmark has climbed 1,765 points or 2.14%, and the Nifty rallied 596 points or 2.4%. For the week, both indexes rose 1%, fuelled by gains in auto and consumer stocks on hopes of a demand growth in the festive season from revisions in the goods and services tax and by S&P’s recent sovereign rating upgrade.
The 30-share BSE Sensex tumbled 693.86 points or 0.85% to settle at 81,306.85. During the day, it plunged 708.94 points or 0.86% to 81,291.77. The 50-share NSE Nifty dropped 213.65 points or 0.85% to 24,870.10. Auto and consumer durables led sectoral advances for the week, with Nifty Auto and Nifty Consumption rising 5% and 4%, respectively.
Sectoral Performance
Shares of IT companies, which get a significant chunk of their revenue from the US, fell 0.8%, also weighing on the benchmarks today. However, IT stocks posted their best weekly gain in over two months, rising 2%. In broader markets, the smallcaps and midcaps were muted on the day. They gained about 2% during the week, outperforming the larger peers.
Market Sentiment
Santosh Meena, Head of Research at Swastika Investmart said, “Nifty ended its six-day winning streak due to lack of support from foreign investors, who have shown no significant buying in the cash market and limited short covering in futures and options. Despite upcoming GST rate cuts, FIIs maintain approximately 90% short positions in index futures”.
The market sentiment is cautious due to the looming threat of a 25% tariff on India, with a deadline set for August 27, 2025. Globally, uncertainty persists due to mixed US economic data and ambiguity surrounding the US Federal Reserve’s interest rate decisions. The market breadth deteriorated, as the advance-decline ratio tilted in favor of the decliners. Out of the Nifty 500 universe, 338 stocks closed in red, reflecting strong bearish sentiment.
Technical Analysis
Nifty 50 has formed an evening star candle pattern on the daily chart, which is considered to be a bearish reversal signal. The zone of 24850-24800 will act as an immediate support for the index, a critical level that must hold to sustain bullish momentum, according to analysts.
A breach below this could see the index slide toward its 200-day moving average (DMA) at 24,050, signaling potential bearish pressure. While on the upside, the zone of 25,100-25,150 will act as immediate resistance for the index.
Rupak De, Senior Technical Analyst at LKP Securities said, “After a steady run-up, Nifty paused, suggesting a brief consolidation before the next leg higher. It continues to hold above the 50 EMA, reinforcing the short-term uptrend. On the downside, support lies at 24,800; staying above this level keeps the trend intact with scope for an advance towards 25,000–25,250.”
Investment Strategy
According to Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd, a significant trend in the market is the outperformance of largecaps, which is “desirable and fundamentally justified”. While Nifty is up by 1% during the last one year, Nifty Midcap 150 is down 0.35% and Nifty Smallcap 250 is down 4.7%. “This trend is likely to continue. Midcap IT is resilient. Investors should focus on valuations now,” he said.
Investors will be keenly awaiting US Fed Chair Jerome Powell’s speech at the annual Jackson Hole symposium, which can significantly influence September’s monetary policy decision. Dr. VK Vijayakumar had predicted that the headwinds for the market from Trump tariffs will weigh on markets constraining the rally of the last six days.
“If the penal tariff of 25% kicks in on August, and this appears likely, the impact on India’s growth will be not be 20 to 30 bp estimated with 25% reciprocal tariffs, but more. The market will have to discount that,” he said.
Conclusion
In conclusion, the Indian stock market has logged a weekly gain driven by Nifty Auto and consumer durables over expectations of GST rate cuts. However, the market sentiment is cautious due to the looming threat of a 25% tariff on India and uncertainty surrounding the US Federal Reserve’s interest rate decisions. Investors should focus on valuations and wait for the US Fed Chair Jerome Powell’s speech at the annual Jackson Hole symposium before making any investment decisions.
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