After snapping a six-week losing streak, Indian equities look set for further upside this week, driven by supportive domestic macros and optimism around GST relief and the sovereign rating upgrade.

Ending six weeks losing streak, the Indian equity market settled higher in the last truncated week, supported by sustained buying by domestic institutional investors (DIIs) coupled with ease in U.S. and India CPI inflation print, which raised hopes of rate cuts by the respective central banks in the near term.

During the week ended August 14, the BSE Sensex rose 739.87 points, or 0.92%, to close at 80,597.66, and the NSE Nifty50 climbed 268 points, or 1.10%, to settle at 24,631.30. The market saw broad-based buying with BSE large and mid-cap indices rising nearly 1% each, while BSE small-cap index ended 0.4% higher.

Among sectors, almost all the major sectoral indices ended in positive territory, led by Nifty pharma and healthcare indices, both rallying over 3%. This was followed by the Nifty Auto index, which added 2.7%, while Nifty PSU Bank index climbed 2%. Meanwhile, profit booking was seen in selective FMCG and consumer stocks.

Technically, on daily and intraday charts, the market has formed reversal patterns, which are largely positive. Additionally, a bullish candle was formed on the weekly charts, indicating the continuation of the pullback in the near future, said Amol Athawale, VP Technical Research, Kotak Securities.

Key triggers for next week

The week ahead is likely to start on a cheerful note, as markets draw optimism from Prime Minister Narendra Modi’s Independence Day address. His statement on a potential GST rate reduction ahead of Diwali has the potential to significantly boost sentiment and lift equities out of the bear grip, said Santosh Meena, Head of Research at Swastika Investmart.

Adding to the positive backdrop are several domestic factors, including easing interest rates, record-low inflation, and a favorable monsoon. “Together, these macroeconomic drivers, along with expectations of GST cuts, could provide the much-needed trigger for a bullish reversal in Indian equities, even as tariff-related headwinds continue to weigh on global markets,” he added.

On the global front, investors will react to the August 15 meetings between U.S. President Donald Trump and Russian President Vladimir V. Putin in Alaska, which both leaders described as “productive,” though progress on Ukraine remains unresolved. Additionally, the U.S. Federal Reserve meeting minutes and upcoming U.S. macroeconomic data - including building permits, housing starts, FOMC minutes, jobless claims, and flash PMI surveys - will be crucial for market direction.

On the domestic macro front, market participant will closely monitor the HSBC India Manufacturing, Services, and Composite PMIs to gauge growth momentum. The market will also react to historic sovereign rating upgrade by S&P Global, which raised India's long-term credit rating to 'BBB' from 'BBB-' with a stable outlook.

The direction of foreign fund flows will also play a crucial role in setting the tone for the domestic equity market. In August so far, foreign institutional investors (FIIs) have offloaded Indian equities worth ₹24,190 crore through the exchanges. However, this selling has been more than offset by strong domestic institutional investor (DII) inflows, with purchases totaling ₹55,790 crore.

Going forward, the FII activity will be influenced by the action on the tariff front, said VK Vijayakumar, Chief Investment Strategist, Geojit Investments. Latest news of easing of tensions between the U.S. and Russia and no further sanctions on Russia indicate that the secondary tariff of 25% imposed on India is unlikely to come into effect after August 27th.

Another positive factor which can influence FII behaviour is the rating agency S&P raising India’s credit rating from BBB-to BBB, he added.

“With the Q1 earnings season now behind us, investor attention is likely to shift towards upcoming geopolitical developments,” said Siddhartha Khemka, Head of Research – Wealth Management at Motilal Oswal Financial Services Ltd.

The Chinese Foreign Minister is scheduled to visit India on August 18 for talks under the Special Representatives (SR) mechanism, while India’s external affairs minister is expected to travel to Russia on August 21, he said.

Strategy Ahead

Going forward, market direction will depend on the interplay between domestic macro data and global risk dynamics, said Ajit Mishra – SVP, Research, Religare Broking. “Softer inflation and resilient PMIs may support sentiment, but cautious FII positioning and external uncertainties could cap the upside. Trade-sensitive and export-driven sectors may remain volatile, while domestic plays in infrastructure, autos, and discretionary consumption could offer relative resilience.”

For Nifty, a sustained break above 24,800 will be critical for further momentum, whereas a slip below 24,350 could invite renewed profit-taking, he said. Investors may adopt a balanced strategy - maintaining exposure to defensives, selectively adding cyclicals on dips, and preserving cash buffers to capitalise on sharp corrections triggered by global events, Mishra added.

Currently, Nifty trades below both its 20-day and 50-day EMAs, with both averages continuing to slope downward, signalling persistent weakness in the medium-term trend, said Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities. On the momentum front, the daily RSI remains flat, reflecting a lack of directional conviction, while the MACD histogram stays below both the zero line and signal line, keeping the broader sentiment subdued.

In this volatile market, traders should prioritise quality stocks, practice strict risk management, align their trades with the broader trend, avoid excessive trading, utilise multi-time frame analysis, and wait for clear price confirmation before taking positions, said Shah.