Market outlook for the week (17-Feb to 21-Feb)

17 Feb 2025 , 09:37 AM

SECTORAL STORY IN THE WEEK TO FEBRUARY 14, 2025

The week to February 14, 2025 saw Nifty and Sensex correcting by -2.63% and -2.47% respectively. During the week, FPIs were net sellers of $(1,601) Million in Indian equities, as the focus was entirely on a likely tariff war. Here is how 20 key sectors performed this week.

Sectoral Index	Weekly Returns	Index (07-Feb)	Index (01-Feb)
Nifty Private Banks	-1.65%	24,513.10	24,924.40
Nifty Banks	-2.11%	49,099.45	50,158.85
Nifty FMCG	-3.58%	53,138.55	55,113.30
Nifty IT	-3.75%	41,311.15	42,921.65
Nifty Infrastructure	-3.95%	7,923.20	8,249.25
Nifty Non-Banks	-4.07%	24,685.05	25,731.40
Nifty MNC	-4.21%	25,920.60	27,059.80
Nifty Metals	-4.64%	8,187.50	8,585.80
Nifty India Digital	-5.06%	8,754.80	9,221.35
Nifty PSU Banks	-5.23%	5,872.45	6,196.75
Nifty Automobiles	-5.93%	22,069.30	23,459.95
Nifty Mobility	-6.03%	18,079.45	19,239.55
Nifty Oil & Gas	-6.16%	9,852.20	10,498.95
Nifty Healthcare	-6.33%	13,319.25	14,218.90
Nifty Energy	-6.84%	30,572.30	32,817.30
Nifty CPSE	-7.21%	5,409.50	5,829.70
Nifty Consumer Durables	-7.71%	35,506.15	38,473.25
Nifty India Defence	-8.55%	5,438.20	5,946.70
Nifty Realty	-9.40%	831.45	917.70
Nifty Capital Markets	-9.59%	3,240.30	3,584.00

Data Source: NSE

Here are key takeaways from weekly sectoral returns table.

• Out of 20 sectoral indices, all the 20 sectors gave negative returns. The sector that retained sanity in the markets was private banks, although even this sector closed in the red. Private banks, FMCG and IT were the sectors that corrected the least.
• Of the 20 sectors that contracted this week, big losers were Capital Markets (-9.59%), Realty (-9.40%), and Defence (-8.55%). Overall, 12 sectors fell more than -5%, of which 5 sector fell more than -7% in the week.
• For the week, the arithmetic average of returns of the 20 sectors stood at -5.60%. The bottom 10 sectors delivered -7.37%. Heavyweights like private banks, IT, and FMCG that fell less than the average saved the day for the Nifty overall.

Nifty VIX spiked sharply to 15.02 levels. The coming week could see the markets in a tight range with a likely tendency to break the support levels.

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

Here are the key events that decided the course of the last week. Let us look at the positive triggers first. CPI inflation in India came in sharply lower at 4.31% in January 2025, compared to 5.22% last month. The 10 bps higher US inflation also changed the undertone of CME Fedwatch, which now expects only 25 bps cut in 2025 and another 25 bps in 2026. This opens the doors for the RBI to cut rates by another 25 bps. While oil was steady, the big positive in the week was the rupee strengthening from ₹87.50/$ to ₹86.50/$.

Let us turn to the negative swing factors in the week. Firstly, the IIP growth for Dec-24 came in sharply lower at 3.22%. It was manufacturing that led the IIP lower, even as mining and electricity actually performed better than expected. But the biggest concern was the general fear in the market over Trump tariffs. That was evident in gold prices touching a lifetime high of $2,933/oz. The fear factor in the markets was also evident in the mutual fund flow data. While flows were still positive, SIP stoppage ratio spiked to a record 109% in Jan-25.

Let us turn to big triggers in the coming week; both domestic and global.

STOCK MARKET TRIGGERS FOR COMING WEEK TO FEBRUARY 21, 2025

Here are key triggers to keep a watch for in the coming week to February 21, 2025.

• There are some positive tidings for the coming week as the pressure is not focused more on the small and large caps. Heavyweight indices like private banks, IT, and FMCG were relatively sober. With the US trade deal, it could drive a recovery next week.
• With the results season for Q3FY25 almost concluding, results were not really all that bad. Nifty companies saw subdued 4.5% growth in revenues, but 14.9% growth in net profits. Pressure of profit growth was only pronounced in the case of small caps.
• It will be a week of two important minutes. The Fed will announced its policy minutes on Wednesday and the RBI will announce the MPC minutes on Friday. Markets will be watching both the triggers for signals on the future rate trajectory.
• The US trade deal gives a boost to defence and trade. However, India needs to handle the oil import commitment demanded by Trump from India and balance Russian costs. The interesting part will be if India can gradually expand the trade surplus with the US.
• Key global data points. Fed Minutes, FOMC speak, Building Permits, Housing Starts, crude stocks, initial jobless claims (US). PBOC Prime Rate (China); Trade Balance, PMI (EU); GDP, Trade Balance, CPI (Japan); Unemployment, CPI, PPI (UK)

What does this mean for Nifty and Sensex in the coming week to February 21, 2025.

PARTING THOUGHTS ON MARKET INDEX LEVELS

For the coming week, there are 3 things to observe.

• VIX spiked from 13.69 to 15.05 levels. There is a clear fear factor in the market as is evident from a base of 12-13 for the Nifty VIX. It opens up a lower breakout.
• Nifty close of 22,929 comes at the end of another sell-off week. Going ahead, 22,758 and 23,476 will be the key support and resistance levels for the Nifty.
• The Hexaware IPO got 2.66X subscription; but barring QIBs all other segments got under-subscribed. That is not a good statement on retail/HNI demand.

A lot will depend on how much impact the Trump tariffs eventually have on Indian trade. For now, the GDP data for Q3 and FY25 estimates will be closely watched on 28-Feb.