Inflation data, Q4 results, Indo-Pak tensions: Key factors to drive Sensex, Nifty this week

The movement in India's share market this week will largely be driven by domestic factors, including macroeconomic data announcements, trading activity of foreign investors, a flurry of corporate results, and developments on tensions between India and Pakistan. On the macro front, the Consumer Price Index (CPI), Wholesale Price Index (WPI), and trade data for exports and imports will be keenly watched, while geopolitical developments will be a key trigger for the domestic equity market.

On the earnings fronts, the corporate earnings season will gain momentum this week, as more than 350 companies, including PVR INOX, Tata Steel, Bharti Airtel, Cipla, GAIL, Hero MotoCorp, Tata Motors, HAL, Lupin, Godrej Industries, BHEL, Eicher, Tata Power, and PB Fintech are set to declare their March quarter results.

Last week, the Indian equity benchmarks, the BSE Sensex and the NSE Nifty, ended lower despite strong global cues as ongoing geopolitical tensions between India and Pakistan took centre stage. The 30-share Sensex declined 1.5% to slip below the crucial level of 80,000 and the Nifty50 dropped 1.4% to end near 24,000, as the domestic market came under pressure amid heightened border tensions after India launched 'Operation Sindoor', where the Indian armed forces destroyed terror infrastructure in Pakistan and Pakistan-occupied Kashmir (PoK). This was in response to the Pahalgam terror attack in J&K on April 22, where 26 innocent civilians were killed.

During the week, realty, power, bankex, and oil & gas were the top losers, falling 6.3%, 3.3%, 2.6%, 2.2%, respectively. On the other hand, auto, consumer durables, and capital goods topped the charts on the sectoral front, gaining 1.5%, 0.6%, 0.3%, respectively.

Key factors to watch this week

Q4 results

Corporate earnings were mixed last week, with many companies such as L&T, Biocon, Titan, APL Apollo Tubes, MRF, BSE, Polycab, KEI Industries, Coforge, CCL products, Mayur Uniquoters delivering strong performance which led to positive reactions in their stock prices.

This week, the ongoing results season will further gain momentum as more than 350 companies including Tata Steel, UPL, Bharti, HAL, Tata Motors, Eicher, Tata Power, and PB Fintech, among others, will announce their Q4FY25 results.

India-Pakistan tensions

Any further escalation of tensions between India and Pakistan will be the biggest overhang on the market which can drag the indices lower, SBI Securities said in a note. On the other hand, if the situation de-escalates, SBI Securities sees a sharp recovery in the market, the note said.

“Investors are recommended to adopt a bottoms-up approach in the market and focus on companies with robust growth outlook. Traders are advised to keep booking profit and adhere to stop losses,” the brokerage said in the report.

FII trend

The trading activity of foreign investors will also set the tone for the equity markets this week. Despite volatility in the domestic market, Indian equities have managed to garner sustained fund inflows from foreign institutional investors (FIIs) as well as domestic institutional investors (DIIs). FIIs and DIIs were both net buyers in the cash market with figures of ₹13,057 crore and ₹3,173 crore, respectively. Going ahead, FII flows are expected to remain volatile amid geopolitical risks, say experts.

After being net buyers for 16 consecutive sessions, FIIs turned net sellers on May 9, paring equities worth ₹3,799 crore amid geopolitical worries. During the last 16 sessions, FIIs had net invested around ₹40,000 crore in Indian equities. In a similar trend, DIIs sold their holdings worth ₹7278 crore on Friday, dragging the Sensex down by 880 points to 79,454, and the Nifty by 266 points to 24,008.

Macro data

On the macroeconomic front, investors will closely monitor the release of key data points including CPI on May 12 and WPI on May 14, and trade figures for exports and imports on May 15.

On the global front, U.S. CPI data will be released on May 13, while weekly initial jobless claim figures are set to be out on May 15.

Technical outlook

Despite the geopolitical tensions between India and Pakistan, the benchmark Nifty index managed to limit its losses, ending the week lower by just over 1%. However, it is important to note that the index continues to trade comfortably above its medium and long-term moving averages, indicating that the broader trend remains intact for now, SBI Securities said in a report.

“The zone of 23,850-23,800 will act as crucial support for the Nifty50 index. If the index slips below the level of 23,800, then the 100-day EMA zone of 23,560-23,500 will act as the next crucial support for the index. While, on the upside, the zone of 24,250-24,300 will act as a crucial hurdle for the index,” the report noted.

From a technical perspective, the Nifty is currently hovering around key moving averages across various timeframes, suggesting the potential for further downside, says Ajit Mishra – SVP, Research, Religare Broking. The immediate support is placed at 23,800, and a decisive break below this level could extend the decline toward 23,200. On the upside, any rebound is expected to encounter strong resistance in the 24,400–24,600 range, he said.

Future strategy

Looking ahead, heightened geopolitical tensions have substantially increased market volatility, as evidenced by the spike in the India VIX. “In this environment, investors are encouraged to adopt a stock-specific approach and avoid aggressive positioning until greater clarity emerges. Employing a hedged strategy is advisable to mitigate near-term risks, while close attention to geopolitical developments will be critical in determining the market's direction moving forward,” said Mishra of Religare Broking.

Siddhartha Khemka, Head - Research, Wealth Management, Motilal Oswal Financial Services, said the investor will continue to focus on the ongoing Q4 earnings season, with major companies like Tata Steel, Tata Motors, Bharti Airtel, and Hindustan Aeronautics scheduled to announce results. Additionally, key macroeconomic indicators such as CPI and the U.S. industrial production data will be closely tracked for insights into the global economic outlook.

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