Market outlook for the week (24-Feb to 28-Feb)

24 Feb 2025 , 02:23 PM

SECTORAL STORY FOR THE WEEK TO FEBRUARY 21, 2025

The week to February 21, 2025 saw Nifty and Sensex correcting by -0.58% and -0.83% respectively. During the week, FPIs were net sellers of $(283) Million in Indian equities, but negative sentiments are yet to change. Here is how 20 key sectors performed this week.

Sectoral Index	Weekly Returns	Index (21-Feb)	Index (14-Feb)
Nifty Capital Markets	5.34%	3,413.35	3,240.30
Nifty Metals	5.16%	8,609.70	8,187.50
Nifty CPSE	4.44%	5,649.50	5,409.50
Nifty Energy	3.34%	31,592.00	30,572.30
Nifty Non-Banks	2.26%	25,244.10	24,685.05
Nifty Oil & Gas	2.25%	10,074.20	9,852.20
Nifty PSU Banks	1.67%	5,970.60	5,872.45
Nifty Realty	1.57%	844.50	831.45
Nifty Infrastructure	1.08%	8,008.45	7,923.20
Nifty Mobility	0.58%	18,184.45	18,079.45
Nifty Consumer Durables	-0.05%	35,489.90	35,506.15
Nifty Private Banks	-0.15%	24,476.90	24,513.10
Nifty MNC	-0.18%	25,873.05	25,920.60
Nifty Banks	-0.24%	48,981.20	49,099.45
Nifty India Digital	-0.90%	8,675.65	8,754.80
Nifty Healthcare	-1.52%	13,117.40	13,319.25
Nifty India Defence	-1.64%	5,349.00	5,438.20
Nifty IT	-1.86%	40,544.50	41,311.15
Nifty FMCG	-1.96%	52,098.15	53,138.55
Nifty Automobiles	-2.55%	21,505.90	22,069.30

Data Source: NSE

Here are key takeaways from weekly sectoral returns.

• Out of 20 sectoral indices, positive and negative returns were split 10:10. Sectors that outperformed were capital markets, metals, energy, and CPSE. Capital market rally was led by BSE and CDSL on competitor valuation hopes. Metals wagered on China recovery.
• Of the 10 sectors that contracted this week, Automobiles, FMCG, IT, Defence, and healthcare were the worst hit. Consumer demand and dollar dependence were the key themes putting pressure on the market this week.
• For the week, the arithmetic average of returns of the 20 sectors stood at 0.83%. The bottom 10 sectors delivered -1.10%, while top-10 delivered 2.77%. The intensity of gainers was clearly far better in the week compared to intensity of losers.

Nifty VIX sobered marginally to 14.53 levels. A tight range for the VIX and positive news flows, may be an indication that the worst may be over, for now.

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

What decided the market move last week? Let us look at the positive triggers first. Firstly, the visit of Prime Minister Modi to the US appears to have been positive, although we need to see deliverables in coming months. The RBI Fed minutes has hinted at a clear shift from price stability to support for counter-cyclical growth measures taken in the Union Budget. Even Fed minutes are hinting at calibrated rate cuts only. The USDINR and the oil prices have now stabilized over last few weeks, which is positive.

Let us turn to the negative swing factors in the week. While the PM’s visit to the US resulted in positive vibes, steep tariffs continue to threaten Indian exports. The impact is likely to be more pronounced since India’s largest exports are to the US. The liquidity tightness in the financial markets continue, despite the RBI infusing billions of dollars of liquidity into the system. It remains to be seen, if the coming monetary policy will witness a combination of a rate cut and a CRR cut. Let us turn to key domestic and global triggers for next week.

STOCK MARKET TRIGGERS FOR COMING WEEK TO FEBRUARY 28, 2025

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

• For the coming week, the big data will be the GDP growth for Indian economy. MOSPI will announce Q3FY25 GDP growth as well as the second estimate for FY25 GDP growth. While the GDP growth for FY25 is likely to be lower than the average of the last 3 years, markets will be pleased if GDP growth is in the range of 6.0%-6.5% for FY25.
• In terms of macroeconomic data flows, DIPP will announce the core sector growth for January, while the fiscal deficit update for first 10 months of FY25 will be put out by the Controller General of Accounts (CGA). Fiscal deficit is likely to be under 4.8% of GDP, as targeted, while core sector growth is expected to falter below the 4% mark.
• Global data flows will be tracked closely in the light of the tariff turmoil created by Trump. The US will announce the Q4GDP second estimate, as well as the PCE inflation for January 2025. While PCE inflation is likely to get closer to 3%, the GDP growth could ease to around 2.3% in Q4, opening the doors for another rate cut.
• Key global data points. GDP, PCE Inflation, EIA Crude stocks, FOMC speak, New home sales, jobless claims, pending home sales, HPI (US). Composite PMI (China); CPI, Core CPI, Policy Minutes (EU); Core CPI, IIP (Japan); MPC Speak, HPI (UK).

What does this mean for Nifty and Sensex in the coming week to February 28, 2025.

PARTING THOUGHTS ON MARKET INDEX LEVELS

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

• VIX tapered marginally from 15.05 to 14.53 levels. While this will keep markets in a tight range, any buy-on-dips approach is only likely at VIX levels of 12-13.
• Nifty close of 22,796 comes at the end of another sell-off week. Going ahead, 22,503 and 22,900 will be the key support and resistance levels for the Nifty.
• While Hexaware got a good listing, the lack of retail and HNI appetite remains a concern. IPOs are likely to be relatively quiet in next few weeks.

Despite positive vibes from the Modi visit to the US, it is unclear what tricks the US has up its sleeve. For now, India GDP data for Q3 and FY25 estimates will be in focus this week!