Domestic markets are expected to remain under pressure amid global weak sentiment. Gift Nifty at 23,320 against a Nifty futures close of 23,500 signals a gap-down opening of 200 points for Nifty. The results season has begun on a mixed note with information technology declaring expected results, while others lag market expectations. 

However, the revival in industrial activity comes as a positive surprise, said analysts.

As expected, the growth in industrial activity accelerated to a 6–month high of 5.2 per cent in November. The positive aspect is that industrial activity has continued to strengthen following signs of softening in the second quarter of the current fiscal. This is in line with the First Advance Estimate of GDP which points towards an estimated improvement in industrial growth in H2 FY25, driven by a recovery in the manufacturing sector, said Rajani Sinha, Chief Economist, CareEdge

The equity market witnessed a sharp sell-off last week, with the Nifty50 plunging 2.39 per cent to close the week at 23,431.50, while the BSE Sensex dropped 2.33 per cent, settling at 77,378. The Bank Nifty experienced significant pressure, breaking below the critical 50,000 level, ending the week 4.42 per cent lower at 48,734. 

Below 200-day EMA

“All major indices are now trading below their crucial 200-day EMA, highlighting the persistent bearish momentum. The sharp decline in the market is attributed to multiple factors, including sustained foreign investor outflows, subdued expectations for Q3 earnings, continued weakness in the Indian rupee against the US dollar, and rising US 10-year bond yields, which have driven FIIs towards the US bond market. Additionally, a strengthening dollar index and a sharp rebound in crude oil prices, raising inflationary concerns, further dampened investor sentiment. In the domestic market, FIIs remained net sellers, offloading ₹16,854 crore in the cash segment. However, DIIs provided strong support, with net inflows of ₹21,682 crore, partially cushioning the market’s fall, said Puneet Singhania, Director at Master Trust Group.

Consolidation may persist in the near term, with investors closely watching today’s US non-farm payroll data for further guidance. Additionally, India’s CPI release on Monday will be a key factor, according to Siddhartha Khemka, Head – Research, Wealth Management, Motilal Oswal Financial Services Ltd.

This week, India, UK and US CPI data along with earnings from index heavyweights Reliance Industries, Infosys, HCL Tech and Axis Bank will remain key monitorables, said SBI Securities. Investors are recommended to stick to quality businesses with supportive valuations for medium to long term investment horizon, it advised.

VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said: FIIs intensified their selling spree in January. They have been sellers on all days except January 2. In recent days, selling has intensified. The single major reason for the relentless selling by the FIIs is the steady rise in the dollar index which is above 109 now. The surge in the 10-year bond yield to above 4.6 per cent is ensuring capital flows from emerging markets like India. In the first 10 days of January, FIIs sold equity for ₹22,259 crore. (NSDL)

“The latest data from the US indicates the resilience of the US economy and unemployment has come better-than-expected at 4.1 per cent. This means the possibility of more rate cuts by the Fed in 2025 is receding. This will further push up the bond yield. In brief, the macro construct is not favourable for the return of FIIs in the near-term. They are likely to press further sales, putting pressure on the market,” said Vijaykumar.

Meanwhile, equities across the Asia-Pacific are down in early deals on Monday, following weakness in the US market on Friday.