Market outlook for the week (19-May to 23-May, 2025)

19 May 2025 , 10:23 AM

SECTORAL STORY FOR THE WEEK TO MAY 16, 2025

The week to May 16, 2025 saw Nifty and Sensex gaining +4.21% and +3.62% respectively. During the week, FPIs were net buyers in Indian equities to the tune of $521 Million; rather muted despite the ceasefire. Here are 20 key sectors for the week.

Sectoral Index	Weekly Returns	Index (16-May)	Index (09-May)
Nifty India Defence	17.21%	8,309.15	7,088.95
Nifty Capital Markets	11.60%	4,055.15	3,633.80
Nifty Realty	10.78%	912.55	823.75
Nifty Metals	9.28%	9,201.85	8,420.55
Nifty Non-Banks	7.56%	28,674.70	26,658.90
Nifty CPSE	7.06%	6,504.75	6,076.00
Nifty Mobility	6.78%	20,719.85	19,404.65
Nifty India Digital	6.49%	8,857.75	8,317.80
Nifty Automobiles	5.86%	23,953.15	22,627.80
Nifty IT	5.83%	37,972.35	35,880.10
Nifty PSU Banks	5.78%	6,628.60	6,266.45
Nifty MNC	5.25%	28,156.85	26,751.10
Nifty Oil & Gas	5.25%	11,595.10	11,016.70
Nifty Consumer Durables	4.85%	38,478.40	36,700.10
Nifty Infrastructure	4.51%	9,053.65	8,662.65
Nifty Banks	3.28%	55,354.90	53,595.25
Nifty Private Banks	3.22%	27,671.65	26,807.45
Nifty Healthcare	2.92%	14,072.35	13,672.80
Nifty Chemicals	2.80%	30,043.50	29,225.21
Nifty FMCG	2.57%	57,061.80	55,633.00

Data Source: NSE

All the 20 key sectors gave positive returns this week. Defence, Capital Markets, and Realty; were the 3 sectors with double-digit returns this week. Defence stocks gained on volatile border situation and fresh order flows. Realty stocks gained on strong Q4 offtake numbers. Six stocks gaining over 7% in the week, and 13 stocks gained over 5%.

Overall, average returns of the 20 sectors stood at 6.44%. The top 5 sectors delivered 11.29% returns, while top 10 sectors gave average returns of 8.84%. Even the bottom 10 sectors delivered 4.04% on average, with no losing sectors. The worst performer was FMCG, which gained 2.57% for the week. That is clearly indicative of bullish undertone.

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

On the positive side, CPI inflation for April 2025 fell to 3.16% and WPI inflation to 0.85%. Both were led lower by easing food prices, setting the tone for third repo rate cut by RBI in June. The Indo-Pak ceasefire buoyed sentiments; and led the Nifty and Sensex 4% higher. India’s forex chest jumped to $691 billion, while primary markets prepare for the mega Groww IPO. Addition of Coromandel and Nykaa in MSCI India Index will bring $450 million.

Despite the ceasefire, Indo-Pak tensions persisted. Higher oil and electronics imports led to trade deficit widening to $26.42 Billion in April. There are macro risks from Moody’s cutting US sovereign ratings from AAA to AA1. Indian promoter holdings in Nifty private sector companies fell to an 8-year low of 34.4%. India may also have to worry about the US-China trade deal and Trump showing a clear penchant for supporting Pakistan over India.

STOCK MARKET TRIGGERS FOR COMING WEEK TO MAY 23, 2025

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

• Despite the ceasefire, geopolitical risks would be pronounced next week. Also, India may have to worry about the US pushing trade deals with other countries over India. The US has been known to be partisan in the past.
• The core sector growth is a key data point in the coming week, with core sector growth expected to be above 4% for April. Like in previous months, oil extraction and natural gas output are likely to remain under pressure.
• Indian markets are confused about the trajectory of rates in the US. Despite consumer inflation falling to 2.3% and GDP contracting in Q1, Fed is only expected to implement the next rate cut in September. Indian markets will keep a tab on Fed speak.
• IPO markets will see action on the mainboard in the coming week after Ather IPO. While Belrise Industries will raise ₹2,150 Crore via IPO route, Borana Weaves will raise ₹145 crore through its IPO. The subscription ratio of these IPOs will hold the key.
• Key global data points. Fed Speak, Crude Inventories, initial Jobless Claims, Existing Home Sales, PMI, US Leading Index, Fed Balance Sheet (US). CPI, PMI, ECB Financial Stability Report (EU); Trade balance, PMI, Core CPI (Japan); Unemployment, IIP (China); MPC Member Speak, Composite PMI, CPI (UK).

What does this mean for Nifty and Sensex levels in the coming week to May 23, 2025.

PARTING THOUGHTS ON NIFTY AND SENSEX LEVELS

VIX fell back from 22.75 levels to 16.55, reflecting the ceasefire impact. However, any sustained tapering of VIX looks unlikely at this juncture. Geopolitics still holds the key.

• Nifty closed the week at 25,020 Spot. Nifty has immediate support at 24,959 and major support at 24,842. Immediate resistance is at 25,076 and later at 25,192. Nifty remains a long trade, unless it breaks below 24,658 with volumes. Shorts only below that!
• Sensex closed the week at 82,331 Spot. Sensex has immediate support at 82,147 and major support at 81,779. Immediate resistance is at 82,515 and later at 82,882. Sensex remains a long trade, till it breaks below 81,162 with volumes. Shorts only below that!

The focus shifts to core sector growth next week and the IIP and GDP growth in the last week. In between, a lot will depend on how the Indo-Pak diplomacy evolves and also how the Indo-US trade equations evolve. That will be critical!