Fragments:
Q. Markets are trading slightly lower today, showing a flat to mild bearish tone. What’s driving this trend right now, and what can we expect this week?
Kranthi Bathini: The main driver at the moment is strong domestic liquidity. Despite recent selling by foreign portfolio investors (FPIs), they have now unwound their short positions and even started selective buying. This supported a short-covering rally. Another factor is the optimism surrounding a possible trade deal between India and the US, which has kept markets buoyant in the short to medium term. That said, the market recently came close to its previous high of almost 26,000 but was unable to hold that range, leading to some profit booking. For now, robust domestic liquidity remains the most important buffer for the market.
Q. You’ve mentioned risks before, such as inflation surprises, interest rate shocks and geopolitical tensions. Which of these do you see as the biggest short-term risk over the next three to four months?
Kranthi: Geopolitical uncertainty emerges as the biggest risk. Domestically, India’s macro situation is stable, while inflation is cooling. But global trade frictions, such as ongoing tariff tensions between the US and Japan, Korea and China, are driving volatility in Asian markets. Even if India and the US sign an agreement, such instability could weigh on sentiment elsewhere. Another risk arises from Indian imports of crude oil from Russia. While it helps stabilize global prices, any policy change here could trigger market reactions in the short term. Overall, the bigger risks right now are external, not domestic.
Q. What about the positive triggers? What could improve markets in this environment?
Kranthi: A successful trade deal between India and the US would be a strong positive trigger. It could improve global investor confidence in India. Currently, foreign fund managers are cautious due to global uncertainty. At the national level, GST rationalization and continued reforms could boost demand in the coming quarters. Inflation is easing, and if the Reserve Bank of India implements a rate cut in the upcoming policy, it could further boost consumption. Moreover, a reform-oriented Union budget could become an important driver of sentiment.
Q. Which sectors look promising in the near term, and which should investors avoid for now?
Kranthi: Banking and financial services remain strong; they have led the recent market rally. Defense is another sector to keep an eye on; The government’s focus and increased budget allocation make it very attractive for investors in the medium to long term.
On the other hand, IT should be avoided in the short term unless you are a contrarian long-term investor. Oil marketing companies also appear weak for the time being. So I would remain positive on BFSI and defence, and cautious on IT and OMCs.
Q. How do you view the current earnings season? Are there any trends or important insights?
Kranthi: According to Crisil, the top 600 Nifty companies are likely to post revenue growth in the second quarter, although margins may remain under pressure. So far the results have not yielded any major surprises, neither sharply positive nor negative. The first half of the year was subdued, reflecting global uncertainty and trade tensions in recent months. However, the rationalization of the GST and other reforms should start to reflect in better profits in the coming quarters. Overall, the second quarter was stable and we could see stronger growth towards the end of the financial year.
Q. What is the current market sentiment? Is it too bullish, too bearish or somewhere in between?
Kranthi: Sentiment is currently positive to neutral. The market is consolidating close to 26,000, with strong support from domestic institutional investors. A clear trade deal or policy stimulus could easily make sentiment more optimistic in the short term.
Q. The golden question: valuations. Are Indian markets currently cheap, expensive or fairly valued?
Kranthi: From a global perspective, India remains one of the most attractive emerging markets. However, the narratives are changing quickly: we have seen sentiment shift from ‘Buy India, Sell China’ to ‘Buy Emerging Markets’ and back again in a matter of months. In the short term, volatility and changing global flows limit upward momentum. Overall, I would say India remains a ‘buy on dips, sell on rallies’ market. Follow-up purchases were missing for around 26,000 units due to uncertainty over profits and weak FPI flows. If earnings rise, we can sustain higher levels, but foreign inflows are critical for the next step up.
Q. What is your investment strategy for the coming week?
Kranthi: It is better to stay partially cash. The markets are currently bandwidth-sensitive and largely stock-specific. I would see 25,500 on Nifty as strong support and 26,000 as major resistance. If we stay above 25,500, the short-term trend remains positive; a breakout above 26,000 could extend the uptrend.
Q. Are there any specific support and resistance levels for Sensex and Nifty next week?
Kranthi: For Nifty, 25,500 is a strong support while 26,050 acts as immediate resistance. If Nifty remains above 26,050, we could see a rally in the near term.
Q. Finally, several mega IPOs worth around ₹35,000 crore are in the pipeline, while Nifty is hovering near record highs. Could this IPO rush push the index higher?
Kranthi: The success of LG’s IPO has already increased confidence in the primary market. Strong quotes can certainly support sentiment.
However, new IPOs also temporarily withdraw liquidity from the secondary market. Although the primary market looks optimistic, both segments will continue to closely influence each other.
Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts/brokers do not represent the views of Economic Times.
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