Indian equities were witness to aggressive bullishness this week, driven by optimism of solid H2 FY26 earnings, spurred by GST rationalisation and the benefits of monetary easing.
Benchmark indices closed the week in a good position, with the Nifty advancing about 1.32% and the Sensex increasing about 1.21%. Auto and IT stocks led the rally, and midcap and smallcap stocks outperformed the largecap markets.
The IT industry experienced optimism again, fueled by optimism of a cut in Federal Reserve rates, Infosys' announcement of a buyback, and hopes of a bounce in technology expenditure.
The Nifty gained 373 points, creating a strong bullish candle. The index has convincingly broken out from a symmetrical triangle pattern on the weekly chart, and hence, the possibility of further up move was indicated by analysts.
"The Nifty has demonstrated resilience by staying comfortably above the 25,100 mark, finishing at 25,114. It remains trading above its important EMA levels—reflecting the larger bullish tone," Choice Equity Broking added. The immediate resistance levels are 25,160, 25,250, and 25,500, while support can be expected at 25,000 and then 24,900.
Consumer-oriented industries like auto and FMCG also picked up, with hopes that GST reductions will spur domestic consumption and aid demand recovery, said Vinod Nair, Head of Research at Geojit Investments Limited.
At the macro level, domestic CPI inflation edged up marginally, and persistent foreign fund outflows remained a drag on the rupee. Gold rates rose to new highs with robust safe-haven buying fueled by global trade tensions.
US retail inflation jumped to 2.9% in August—the highest since January—while core inflation, excluding food and energy, held steady at 3.1%. Investors were preoccupied with weakening job growth and the likelihood of faster Fed easing. The yield on the 10-year US Treasury note declined to 4%, the lowest since April.
The Federal Reserve has been warned by analysts not to cut rates in the face of still-elevated inflation but said that the signs are unmistakable. With US CPI reading and deteriorating labour market trends, a 25-basis-point rate reduction is widely expected at next week's FOMC, with about three cuts on the cards for the rest of 2025.
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