Market outlook for next week (12-May to 16-May)

12 May 2025 , 03:30 PM

SECTORAL STORY FOR THE WEEK TO MAY 09, 2025

The week to May 09, 2025 saw Nifty and Sensex losing -1.39% and -1.30% respectively. During the week, FPIs were net buyers in Indian equities to the tune of $1,658 Million; despite geopolitical risks. Here are 20 key sectors for the week.

Sectoral Index	Weekly Returns	Index (09-May)	Index (02-May)
Nifty Automobiles	1.53%	22,627.80	22,286.50
Nifty India Defence	0.72%	7,088.95	7,038.45
Nifty Consumer Durables	0.32%	36,700.10	36,583.30
Nifty IT	-0.03%	35,880.10	35,891.85
Nifty Mobility	-0.05%	19,404.65	19,414.60
Nifty Chemicals	-0.21%	29,225.21	29,287.58
Nifty MNC	-0.57%	26,751.10	26,904.90
Nifty India Digital	-0.88%	8,317.80	8,391.30
Nifty FMCG	-1.10%	55,633.00	56,252.25
Nifty Metals	-1.15%	8,420.55	8,518.40
Nifty Infrastructure	-1.50%	8,662.65	8,794.50
Nifty CPSE	-1.94%	6,076.00	6,195.90
Nifty Healthcare	-2.12%	13,672.80	13,968.25
Nifty Capital Markets	-2.14%	3,633.80	3,713.25
Nifty Private Banks	-2.15%	26,807.45	27,396.40
Nifty Non-Banks	-2.15%	26,658.90	27,244.85
Nifty Oil & Gas	-2.17%	11,016.70	11,261.05
Nifty Banks	-2.76%	53,595.25	55,115.35
Nifty PSU Banks	-4.39%	6,266.45	6,554.45
Nifty Realty	-6.56%	823.75	881.55

Data Source: NSE

Out of 20 sectoral indices, only 3 sectors gave positive returns, while 17 sectors gave negative returns amidst rising geopolitical risks. Automobiles gained as the US-UK trade deal was favourable for JLR. Defence continued to attract buying amidst the rising geopolitical risks. A total of 8 sectors dipped more than 2% in the week, with realty worst hit.

Overall, average returns of the 20 sectors stood at -1.46%. The top 10 sectors gave an average return of -0.14%, while the bottom 10 sectors delivered average returns of -2.79%. Only automobiles gained more than 1%, while gains in defence were muted after the 2-week rally. On the downside, the PSU banks and realty sector were the worst hit.

WEEK THAT WAS; THE GOOD, THE BAD AND THE UGLY

Operation Sindoor launched by India in retaliation for the Pahalgam attacks was the big news. In one week, the geopolitical situation deteriorated sharply and the impact is visible on the indices and also on VIX. The other big event last week was the Fed policy. Despite pressure from President Trump, the Fed chair held status quo on rates. FPIs were net buyers this week to the tune of $1.66 Billion, taking net FPI buying in last 4 weeks to $5.87 Billion.

There was encouraging news in the form of the US-UK trade deal, which provides a template for India. The deal includes auto quotas and Tata Motors JLR reacted positively. The Indo-UK FTA is likely to expand trade meaningfully. Q4FY25 was a mixed bag with smaller FMCG and IT stocks getting their formula right. The greatest investor, Warren Buffett, will finally retire by end of 2025 and make way for Greg Abel; after a 60-year stint at Berkshire Hathaway.

STOCK MARKET TRIGGERS FOR COMING WEEK TO MAY 16, 2025

Here are key triggers that could influence stock markets next week.

• Geopolitical risk is the big story to watch out for as the border situation between India and Pakistan is now almost looking like a full-fledged war. The impact is visible in the Nifty and Sensex crashing in the last two days, while the VIX has spiked to 22.75 levels.
  
• The focus next week will be on trade deals, after UK signed trade deals with the US and with India. There have been expectations that the US is keen on trade deals with Japan, South Korea, and India. With the US-UK deal signed, the templates are well in place.
  
• The US-UK trade deal led to the return of optimism in the market. As demand hopes revived, Brent crude bounced by 5% to $63.5/bbl. The US dollar index (DXY) also saw a bounce to above the 100 levels after 3 weeks. Not surprisingly, the rupee weakened.
  
• India will see some key macro data points announced next week. India CPI inflation and WPI inflation are expected to taper further on the back of lower food prices. The trade deficit for April 2025 will also be out, and the first impact of tariffs will be visible.
  
• Key global data points. CPI Inflation, WASDE Report, Powell Speak, API Crude Stocks, initial jobless claims, PPI, retail sales, IIP, and Building Permits (US). GDP, IIP, Trade Balance (EU); Current Account, GDP, IIP (Japan); New Loans (China); Unemployment, GDP, IIP (UK).

What does this mean for Nifty and Sensex in the coming week to May 16, 2025.

PARTING THOUGHTS ON MARKET INDEX LEVELS

VIX bounced from above 18.26 levels to 22.75, reflecting the elevated geopolitical risk. In the current volatile situation, it is difficult for VIX to taper. Geopolitics holds the key.

• Nifty closed the week at 24,008 Spot. Nifty has immediate support at 23,908 and major support at 23,679. Immediate resistance is at 24,136 and later at 24,365. Nifty remains a short trade, unless it breaks above 24,338 with volumes. Longs only after that!
  
• Sensex closed the week at 79,454 Spot. Sensex has immediate support at 78,938 and major support at 77,873. Immediate resistance is at 80,002 and later at 81,067. Sensex remains a short trade, till it breaks above 80,462 with volumes. Longs only after that!

While there are several macro data points next week, and the critical GDP data towards the end of the month; the big driving factor this week will obviously be the geopolitical risk and the border situation. For now, geopolitical volatility is hitting the markets hard!