Stock market outlook: Will Nifty 50 reclaim the 25,000 level next week? | Stock Market News

The Indian stock market benchmark indices, Sensex and Nifty 50, extended their rally for the third consecutive week, ending December 6 with their largest weekly gains in six months. The uptrend was driven by positive momentum in global markets and an RBI policy announcement that aligned with market expectations.

The Sensex jumped 1,906.33 points, or 2.38%, to end at 81,709.12, while the Nifty 50 surged 546.7 points, or 2.26%, to close at 24,677.80. Broader markets, the Midcap and Smallcap indices, outperformed with more than 3% rally each for the week. Large gains were seen in realty, banks, metals and IT stocks.

The domestic equity market received additional support from Foreign Portfolio Investors (FPIs), who turned net buyers of Indian equities in the first week of December. This marked a significant shift from their sustained selling trend over the past two months. According to data from the National Securities Depository Limited (NSDL), FPIs purchased Indian equities worth ₹24,454 crore in December thus far.

“The change in FII strategy is getting reflected in stock price movements, particularly in largecap banking stocks in which FIIs have been sellers. This segment has further room to go up since it is fairly valued and is growing at a reasonable pace. More domestic institutional and retail money are likely to move into this segment. IT is another segment which is likely to do well and attract more FII buying,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

RBI Policy

The Reserve Bank of India’s (RBI) monetary policy decision also influenced market sentiment. While the RBI kept the repo rate unchanged at 6.5%, it reduced the cash reserve ratio (CRR) by 50 basis points to 4% to improve liquidity in the banking system.

The RBI conveyed optimism regarding robust demand and industrial growth, driven by higher government spending and strengthening rural demand. However, persistently high inflation has postponed the likelihood of a rate cut until at least February 2025.

Stock Market Outlook

The trajectory of the domestic stock market is expected to be influenced by a combination of global developments, key domestic economic indicators, and investment flows from both foreign and domestic institutional investors.

“Key factors such as the rupee’s exchange rate and crude oil prices will play a critical role in determining market trends. Globally, geopolitical tensions, particularly the ongoing Russia-Ukraine conflict, continue to pose challenges,” said Pravesh Gour, Senior Technical Analyst at Swastika Investmart Ltd.

However, recent declines in the dollar index and US bond yields have created a more favorable environment for emerging markets like India. On the economic front, significant macroeconomic releases — including retail inflation and industrial production data from India, as well as US Core CPI and unemployment figures—are expected to influence overall market sentiment, Gour added.

Will Nifty 50 reclaim 25,000 level?

On Friday, the Nifty 50 index declined 30.60 points, or 0.12%, to close at 24,677.80. The index ended the week 2.7% higher.

Technically, on the daily timeframe chart, the Nifty 50 index decisively surpassed the resistance zone, breaking the bearish cycle of lower highs. The index also sustainably rose above all its major EMAs (Exponential Moving Averages) after a prolonged period.

“The benchmark index exhibited surprising movements this week but effectively handled the volatility and moved towards a more favorable position. Additionally, the across-board buying emergence led to a smooth transition to the bullish trend. Structurally, the index has surged almost 6% from the recent lows and has now headed for the 50% Fibonacci retracement of the decline, which is placed around 24,770. The sentiments certainly have turned bullish but required a pragmatic approach with dips to augur well for buyers and staying light at elevated zones,” said Osho Krishnan, Sr. Analyst, Technical & Derivatives of – Angel One.

Technically, according to him, the support base now shifts upward towards 24,500 on an intermediate basis, which is likely to cushion any intra-week blips, followed by a sacrosanct support zone placed from the 24,350 – 24,250 zone.

On the higher end of the spectrum, 24,800 followed by 25,000 – 25,100 is likely to be seen as the next potential resistances for the benchmark index in the upcoming week, Krishnan added.

Krishnan advises not to become overly aggressive given the currency market movement and instead, waiting for dips could be a more prudent strategy at this time. Simultaneously, staying abreast with global developments, along with being selective with stock preferences, is advised.

Puneet Singhania, Director at Master Trust Group, noted that Nifty 50 has reclaimed a bullish stance after five weeks of trading below the 21-week EMA, closing above it for the first time.

“The strong support is at 24,250, aligned with the 21-day EMA, making it a key level for traders. Buying is favourable around 24,500 with a stop loss at 24,250. On the upside, the index may aim to reclaim the psychological 25,000 level. However, if it breaches 24,250, further downside toward 23,900 is possible. The current trend indicates cautious optimism, with opportunities for buying on dips and clear risk levels for managing trades effectively,” said Singhania.

According to Pravesh Gour, Senior Technical Analyst at Swastika Investmart Ltd, in the derivatives market, FIIs hold 55% short positions in index futures, while the put-call ratio (PCR) stands at 1.03, indicating the potential for a short-covering rally. Historically, December has been a favorable month for the markets, which could provide a supportive backdrop for positive momentum.

On the weekly charts, the Nifty 50 index formed a long bullish candle and maintained a higher bottom formation. It successfully closed above the 50-day Simple Moving Average (SMA).

“The near-term trend of Nifty remains positive. Having moved above the crucial hurdle of 24,500 there is a possibility of more upside in the coming week/s. The next upside targets to be watched are around 24,857 – 24,882 band and later 25,084 in the near term. Immediate support is at 24,351,” said Deepak Jasani, Head of Retail Research at HDFC Securities.

Bank Nifty Outlook

Bank Nifty ended above the 53,500 level on Friday, establishing a strong base around the 49,800 – 50,000 range, followed by a breakout from consolidation, closing the week robustly above the 21-week and daily EMAs.

“This signals a bullish undertone, with the market favouring buy-on-dips as long as it trades above 51,700. The immediate upside target is set at 54,200, which aligns with the ongoing positive momentum. However, a breach below 51,700 could trigger a correction toward the 51,000 mark. The overall trend appears sideways to bullish in the short term,” said Puneet Singhania of Master Trust Group.

Pravesh Gour of Swastika Investmart Ltd. highlighted that the Bank Nifty index continues to demonstrate robust momentum, with 53,800 – 54,000 as the immediate resistance zone.

“A breakout above 54,000 could pave the way for the next resistance range at 54,500-55,000. On the downside, 52,600 serves as immediate support, with 52,300 acting as the subsequent support level,” Gour said.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.