Nifty reclaims 23,000: Indian equity markets staged a strong recovery last week, with the Nifty reclaiming the 23,000 mark after recent selling pressure. According to Jay Thakkar, Head of Derivatives and Quant Research (Vice President) at ICICI Securities, Improving broader market participation, renewed FII buying and strength in select sectors have supported the rebound. However, rising crude oil prices, geopolitical tensions and uncertainty over global interest rates continue to pose risks.
Global financial markets witnessed a mixed week as investors navigated an important combination of central bank decisions, corporate earnings and escalating geopolitical tensions. While expectations around monetary policy remained broadly stable, the renewed rise in crude oil prices towards the end of the week brought inflation and energy supply concerns back into focus, according to Thakkar.
He said that the US Federal Reserve kept interest rates unchanged in the range of 3.75 per cent–4 per cent, although the decision was not unanimous, with two members preferring a 25-basis-point rate hike. The Fed’s assessment that economic activity remains strong, while inflation continues to be elevated, suggests that investors should not assume an immediate shift towards monetary easing.
The European Central Bank and Bank of Japan also maintained their respective policy rates, reinforcing the view that major central banks remain cautious about declaring victory over inflation.
Meanwhile, US equities faced selling pressure towards the end of the week, particularly in technology stocks.
Concerns surrounding the sustainability of artificial intelligence-related investments and the substantial capital expenditure commitments of large technology companies triggered profit booking. The Nasdaq ended the week lower, highlighting that even companies benefiting from structural growth themes are not immune to valuation concerns, Thakkar added.
Geopolitical developments in West Asia, however, remained the biggest concern for commodity markets. Brent crude surged towards USD 118 per barrel on Friday, settling at USD 117.64, after an attack on a tanker in the Strait of Hormuz renewed fears of disruption to global energy supplies. Brent gained approximately 13.6% during October, making it increasingly difficult for energy-importing economies to ignore the inflationary consequences.
For India, Thakkar highlighted that the combination of elevated crude prices and a relatively weak currency remains a significant macroeconomic risk. Although the rupee recovered towards 94.95 against the US dollar on Friday, sustained pressure on energy prices could reverse some of these gains.
The key takeaway is that global equity markets are attempting to balance resilient economic activity and corporate earnings against the possibility of prolonged restrictive monetary conditions. A meaningful correction in crude oil would improve the outlook for emerging markets, whereas another escalation in West Asia could quickly reverse the recent improvement in investor sentiment.
Domestic Market Performance
Indian equity markets staged a meaningful recovery during the week, with Nifty gaining 453 points, or approximately 2 per cent, to close at 23,053.10. Sensex advanced 1.83 per cent to settle at 74,459.53, marking a welcome recovery after the weakness witnessed during the previous week.
The recovery was supported by renewed foreign institutional buying, encouraging corporate earnings in select sectors and improving sentiment following the listing of Jio Platforms.
More importantly, buying interest was visible beyond the benchmark indices. Nifty Midcap 150 gained 2.21 per cent, while Nifty Smallcap 250 advanced 2.32 per cent. This improvement in broader market participation is encouraging because the previous correction had witnessed considerable pressure across market capitalisations.
However, the recovery should be evaluated in the context of the preceding decline. Nifty had faced considerable selling pressure during the previous week, and the latest advance has recovered only a portion of the lost ground. Therefore, it would be premature to conclude that the broader market has entered a fresh bullish phase.
From a technical perspective, Nifty has managed to move above its 21-day exponential moving average, currently placed around 22,850. This is a positive development and suggests that immediate selling pressure has eased.
However, the 50-day moving average near 23,160 remains an important hurdle. A sustained move above this level would improve the medium-term technical structure and provide stronger evidence that the recent recovery is developing into a trend reversal.
For the immediate trading sessions, 22,850–22,800 will act as an important support zone, followed by 22,650–22,700. On the upside, 23,150–23,200 is the first major resistance area, followed by 23,500, Thakkar further said.
The ability of Nifty to sustain above 23,000 will therefore be important in determining whether the market can extend its recovery.
FII Buying Returns: A Positive Development, But Not Yet a Trend Reversal
One of the most encouraging developments during the week was the return of foreign institutional investors to the domestic cash market.
FIIs were net buyers of approximately Rs 7,248 crore during the four sessions for which the week’s provisional data was available. This is a welcome change after sustained selling during October.
However, the larger picture remains challenging. Despite the recent buying, FIIs have remained net sellers to the tune of approximately Rs 44,218 crore during October. In contrast, domestic institutional investors have purchased nearly Rs 60,296 crore during the month, providing substantial support to the domestic market.
This divergence highlights the increasing importance of domestic institutional participation in absorbing foreign selling.
The recent return of FII buying could indicate an improvement in global risk appetite, but a few sessions of positive flows should not be interpreted as a complete reversal in foreign investor positioning.
The sustainability of these inflows will depend on several factors, including the movement in crude oil, the rupee, US bond yields and the relative attractiveness of Indian equity valuations compared with other emerging markets.
If foreign buying continues alongside domestic participation, it could provide the necessary liquidity for Nifty to move beyond its immediate resistance levels.
However, if the latest inflows prove temporary, the market could once again struggle to sustain higher levels.
Crude Oil: The Biggest Macro Risk Has Not Disappeared
While equity markets recovered during the week, crude oil remained a significant concern.
Brent crude’s movement towards $118 per barrel is particularly important because it comes at a time when investors were beginning to anticipate some moderation in geopolitical risks, Thakkar said.
The latest attack on a tanker in the Strait of Hormuz has once again highlighted the vulnerability of global energy transportation routes. Any prolonged disruption in the region could have consequences extending well beyond the crude oil market.
For India, higher crude prices can increase the import bill, put pressure on the current account deficit, weaken the rupee and complicate the inflation outlook.
At the corporate level, the impact is likely to be uneven.
Aviation companies face higher aviation turbine fuel costs, while paint manufacturers, tyre companies, chemicals and logistics businesses could experience higher input and transportation expenses.
Downstream oil marketing companies could face pressure depending on their ability to pass on higher crude costs, while upstream producers may benefit from improved realisations, subject to government policies and operating costs.
The important point is that a recovery in equities accompanied by rising crude prices may not be sustainable unless earnings expectations remain resilient.
For the domestic market, a moderation in Brent towards USD105–USD110 would provide considerable relief. Conversely, a sustained move above USD 120 would increase the probability of renewed pressure on inflation expectations, corporate margins and foreign investor sentiment.
Therefore, crude oil remains an important variable that could determine whether the current market recovery gains momentum or loses steam.
Earnings Season: Positive Surprises Create Opportunities for Stock Selection
The September-quarter earnings season has started providing important stock-specific opportunities, even as the broader macroeconomic environment remains challenging.
Several companies have delivered encouraging numbers, demonstrating that earnings growth remains resilient in selected segments.
These developments highlight the importance of separating company-specific performance from broader market sentiment.
While elevated crude prices and currency movements could affect several industries, companies with strong execution, pricing power and relatively resilient demand may continue to deliver earnings growth.
In the coming weeks, management commentary on demand, margins, capital expenditure and FY27 guidance will be equally important as the reported quarterly numbers.
Sectoral Outlook: Pharma Leads, While Energy Remains Under Pressure
Sectoral performance during the week reflected a clear shift towards selected defensive and earnings-driven opportunities.
Pharmaceuticals and Healthcare: Pharma emerged as one of the strongest-performing sectors, with the Nifty Pharma index gaining approximately 7.1 per cent during the week. Healthcare also advanced nearly 6.9 per cent. The strength in these sectors indicates that investors are increasingly looking at companies with relatively stable demand and earnings visibility. The sector could continue to attract interest, although stock-specific valuations and US business exposure need to be monitored.
Information Technology: IT stocks witnessed a relatively moderate recovery. While the weaker rupee can provide some support to export-oriented companies, global technology spending and overseas demand remain important variables. The recent weakness in US technology stocks also warrants caution.
Banking and Financial Services: Banking stocks participated in the recovery, although Bank Nifty’s weekly advance of approximately 0.7 per cent was relatively modest compared with the broader Nifty. This divergence suggests that the banking sector has not yet provided strong confirmation of a sustained market recovery. The ability of private-sector banks and large financial institutions to attract fresh buying will remain important.
Oil and Gas: The Nifty Oil & Gas index was among the weakest sectoral performers, declining approximately 0.7 per cent during the week. Rising crude prices have created uncertainty around the profitability of downstream businesses and the broader energy value chain. Upstream and downstream companies could continue to display divergent performance.
Auto, Tyres, Paints and Chemicals: These sectors remain sensitive to crude oil and other petroleum-linked inputs. A correction in energy prices could improve their margin outlook and create opportunities in selected stocks. However, a sustained crude rally would remain a key risk.
Real Estate and Capital Markets: Both sectors witnessed encouraging buying interest during the week. The improvement in market sentiment and relatively lower bond yields have helped support these segments. However, the sustainability of this performance will depend on liquidity, earnings growth and the broader interest-rate environment.
The broader sectoral outlook therefore remains selective rather than uniformly bullish. Investors should focus on earnings visibility, balance-sheet strength and the ability of companies to manage input-cost volatility.
India VIX and Derivatives Positioning
India VIX moderated during the week and moved towards the 15–16 zone, indicating some cooling in near-term market uncertainty.
This is a constructive development, particularly when viewed alongside the recovery in Nifty and improving participation in the broader market.
However, the movement in VIX needs to be monitored closely because crude oil and geopolitical developments can quickly trigger a rise in hedging demand.
From a derivatives perspective, the 23,000 level assumes considerable importance, as Nifty has reclaimed this psychological mark after struggling below it.
The next important reference point is the 23,200 zone, which coincides with the 50-day moving average area. A sustained move above this level could encourage further short covering and improve the prospects of a recovery towards 23,500.
On the downside, 22,800–22,850 is an important immediate support area. A decisive break below this zone could bring selling pressure back towards 22,650 and 22,500.
The derivatives setup should therefore be interpreted in conjunction with price action and market breadth rather than relying exclusively on individual strike-level positioning.
A recovery accompanied by declining volatility, improving breadth and sustained institutional buying would provide a much stronger bullish signal than an isolated rise in the benchmark index.
The options data also indicates the similar thing as 23500 strike has the highest call base whereas on the lower side 23000, 22800 and 22500 strikes have strong put base
The PCR of the currently weekly expiry has turned overbought, and on Monday if the markets open positive, then it will turn even more overbought; hence, 23500 may act as a hurdle, however beyond 23500 there could be more upside potential until 24000 levels
The domestic market enters November with a relatively improved technical structure, but the macroeconomic environment continues to present significant challenges.
On the positive side, Nifty has reclaimed 23,000, foreign institutional investors have returned as net buyers during several sessions, domestic institutions continue to provide liquidity support and the earnings season has delivered encouraging results in selected sectors.
On the negative side, crude oil has moved towards $118 per barrel, geopolitical uncertainty remains elevated, October has witnessed substantial cumulative FII selling and major global central banks continue to maintain a cautious approach towards monetary easing.
My expectation is that the market could witness further recovery attempts, although volatility and stock-specific divergence are likely to remain high.
For Nifty, 22,800–22,850 is the immediate support zone, followed by 22,650–22,700. As long as the index sustains above this region, the possibility of a recovery towards 23,200 and subsequently 23,500 remains open.
However, a decisive move above 23,200 is essential to improve the medium-term technical outlook. Above this level, the next important resistance could emerge around 23,500–23,600.
For Bank Nifty, 53,500–54,000 remains an important support zone, while 55,300–55,400 is the immediate resistance area. A sustained breakout above this resistance could improve the prospects of banking stocks participating more meaningfully in the broader market recovery.
The recovery witnessed during the week is encouraging, particularly after the selling pressure experienced during the previous week. The return of foreign institutional buying, improvement in broader market participation and strength in selected earnings-driven sectors suggest that investor confidence is gradually stabilising.
However, it is important to distinguish between a relief rally and a sustainable trend reversal.
The biggest concern remains crude oil. A sustained rise in energy prices could complicate India’s inflation outlook, put pressure on the rupee and eventually affect corporate profitability. At the same time, the return of FII buying needs to continue for a longer period before it can be considered a meaningful change in institutional positioning.
Thakkar said that my approach would be cautiously optimistic, with an emphasis on confirmation rather than anticipation.
For Nifty, 22,800–22,850 is the immediate support zone, while 23,200 is the crucial resistance to watch. A sustained move above 23,200 could open the possibility of a recovery towards 23,500–23,600. Conversely, a breakdown below 22,800 would weaken the current recovery structure and bring 22,650 and 22,500 back into focus.
The market has made an encouraging attempt to recover, but the next leg of the rally will require more than short covering. Sustained FII participation, stronger banking stocks, improving earnings visibility and a moderation in crude oil prices will be essential.
For now, November begins with a better technical setup than the previous week, but the confirmation of a durable bullish trend remains contingent on both domestic institutional participation and improvement in the global macroeconomic environment.
The 3 stock recommendations are as follows
1. Buy Coforge fut in the range of 2020-2050 stop loss below 1950 Targets 2180-2250
The stock has made a new lifetime high after a long time indicating a breakout. The stock is outperforming its peers i.e. the overall sector and that clearly indicates the relative strength of the stock. As per the options data, the stock has managed to close well above 2000 strike which has the highest call base, hence there is a higher probability of call unwinding from hereon. There has been significant put additions at the lower levels as well which will provide support. The max pain is also at 2000 and the stock has moved beyond it which is also quite positive
2. Buy ITC Fut in the range of 265-280 stop loss below 258 Targets 295-305
The stock has finally closed above 265 levels after a long time and now it has started to form higher tops and higher bottoms. The short-term selling pressure seems to have got absorbed and hence 250 levels now should act as a short-term support. As per the options data, 265 and 270 strikes have the highest call base and hence closing above the same is very critical and 250 strike has the highest put base which will act as a support. The max pain is 262.50 and the stock has also closed above the same which will now act as a support.
3. Buy Kotak Bank fut in the range of 457-463 stop loss below 445 Targets 475-485
Kotak Bank has formed a 52-week high, and the overall strength has been quite strong as compared to its peers. As per the options data, there has been significant put additions from 430-460 strikes and 470 has the highest call base. Based on the recent price action and options data, the probability of continuation of an upward momentum is quite high. The stock is also trading well above 450 levels which will now act as a short-term support.
(Disclaimer: The above article is meant for informational purposes only and should not be construed as investment advice. ET NOW DIGITAL advises its readers to consult their financial advisors before making any investment decisions.)