Can Sensex, Nifty sustain the rally further? Q4 earnings to dictate future trend for D-Street

As the Indian equity market tries to move beyond tariff uncertainties and their impact on global economic growth, traders will shift focus to corporate earnings reports and their outlook for the next fiscal. The market trends will depend on the way Dalal Street will react to the quarterly results of IT heavyweight Infosys and banking majors HDFC Bank and ICICI Bank which released their earnings reports over the weekend. Adding to it, other big players such as HCL Technologies , Axis Bank, Hindustan Unilever , and Maruti Suzuki India are set to announce their quarterly results this week.

Last week, the Indian share market experienced a strong resurgence during the holiday-shortened week, with benchmark indices BSE Sensex and NSE Nifty rallying over 4.5% despite global trade uncertainty. All major sectors participated in the uptrend, with realty, banking, and financials emerging as the top gainers. Other sectors also posted healthy gains. The broader indices also performed in line with the benchmark performance and rose over 4% each, highlighting a broad-based rally across indices.

Driven by the recent rally, the benchmarks have turned positive for 2025, paring five consecutive months of negative returns since October 2024. The surge in the market was driven by a temporary pause on reciprocal tariffs by the U.S. and prospects of negotiations with other countries, which prompted foreign investors to pour money into domestic markets. The forecast of an above-normal monsoon this year also lifted sentiments.

“This sharp rally in Indian equities over the past week has been driven by a combination of softened valuations from the earlier correction, a relief rally due to the US tariff pause, and positive cues from the RBI’s monetary policy,” said Vishnu Kant Upadhyay, AVP - Research & Advisory, Master Capital Services.

Ajit Mishra – SVP, Research, Religare Broking, also believes that the market surge was primarily fueled by optimism surrounding the deferral of tariffs and recent exemptions on select products, raising hopes for potential negotiations that could mitigate the impact on global trade. As the week progressed, market participants responded positively to a slew of favorable developments, including updates on a normal monsoon, easing retail inflation—which raised hopes for potential policy rate cuts—and the absence of any major negative surprises from global markets, he said.

Are FIIs coming back?

In three trading sessions last week, foreign institutional investors (FIIs) staged a strong comeback by infusing ₹14,670 crore into Indian equities. The renewed buying interest indicates a shift in sentiment amid easing global trade concerns, with exemptions granted to products such as smartphones and computers.

On the other hand, domestic institutional investors (DIIs) turned sellers, paring equities worth ₹6,470 crore in the past three trading days, as they booked profit at higher levels.

So far in calendar year 2025, FIIs remained net sellers, offloading equities worth ₹1.64 lakh crore, which was compensated by net purchases of over ₹2 lakh crore by DIIs during the same period.

“Foreign allocations to Indian equities had dropped to their lowest level in years, leaving global funds structurally underweight on India and creating a significant allocation gap, which could potentially lead to further buying in the future,” said Upadhyay of Master Capital Services.

Will market momentum sustain?

India is the first major market to fully recover from the losses triggered by the U.S. tariff announcements earlier this month. There is optimism in the market that the U.S.-China trade dispute may not harm, but rather benefit, India.

“At present, the domestic macroeconomic environment remains supportive, encouraging investors to increase their exposure to riskier assets for the long term. Additionally, the inflation outlook appears favourable, reinforced by forecasts of an above-normal monsoon and a decline in oil prices,” said Vinod Nair, Head of Research, Geojit Investments.

He, however, warned that the earnings growth for the fourth quarter of FY25 is likely to be insipid due to muted demand and margin pressures.

Echoing the same, Master Capital Services in its note said that the sustainability of this momentum will largely hinge on the upcoming Q4 earnings season. Many major companies are set to release their quarterly and full-year FY25 earnings in the coming week. “These results will be pivotal in shaping the market’s direction, as investors and market participants closely evaluate corporate performance and forward guidance. Disappointing earnings could dampen the current market sentiment and erode recent gains.”

Key levels to watch

Last week, the equity benchmark Nifty50 successfully surpassed the 20-day and 50-day SMA (Simple Moving Average) zones, which is largely positive. On the weekly charts, a bullish candle was formed, and the market is holding an uptrend continuation formation on both daily and intraday charts, supporting further upward movement from current levels, says Amol Athawale, VP-technical Research, Kotak Securities.

“We believe that the short-term market texture is bullish; however, due to temporary overbought conditions, we may see range-bound activity in the near future. For traders, the levels of 23,500/77400 and 23,350/76900 for Nifty and Sensex would act as key support zones, while resistance areas for the bulls could be found between 24,000/79000 and 24,200/79600.”

However, if the market dips below 23,350/76900, sentiment could change, prompting traders to consider exiting their long positions, he added.

The Bank Nifty, which rallied over 6% last week and inched close to its 52-week high levels, also formed a long bullish candle on the weekly charts, which is broadly positive. For trend-following traders, the important support levels would be 53,500 and 53,100. “As long as these levels hold, the uptrend is likely to continue. On the higher side, the index could move up to around 54,500-55,000, with further upside potential that might lift it to 55,300.”

Trading strategies for investors

Investors are advised to adopt a cautious stance, particularly with export-oriented stocks, and instead focus on pure domestic themes such as banking, consumer goods, healthcare, transportation, and infrastructure, said Vinod Nair of Geojit Investments.

“In the week ahead, a sector- and stock-specific investment strategy is anticipated, driven by upcoming earnings releases and subsequent management commentary, which will play a key role in shaping market sentiment," he said.

With signals pointing to a continuation of the current recovery, a “buy on dips” approach is advisable until Nifty breaches the 23,000 mark, Ajit Mishra of Religare Broking said. Sector-wise, rate-sensitive segments such as banking, financials, auto, and realty continue to be preferred and advised to be selective in other sectors.

He said that participation from the broader market is also visible. The further strengthening of the bullish sentiment depends on fundamentally sound stocks, especially with earnings season underway.