Will Sensex and Nifty Bounce Back? 5 Key Factors to Watch This Week

After a five-session winning streak, the Indian equity market faced a sharp reversal on Friday, with the Sensex plummeting 607 points to settle at 76,802.90. As investors brace for a volatile week ahead, several geopolitical and domestic factors will dictate whether the Nifty50 can reclaim its momentum.

Geopolitical Tensions: The US-Iran Peace Deal

Market sentiment is currently teetering on the uncertainty surrounding the US-Iran peace negotiations. While a 60-day ceasefire was recently brokered, tensions escalated following claims by Iran's Islamic Revolutionary Guard Corps (IRGC) regarding the closure of the strategic Strait of Hormuz. Although the US military maintains that commercial shipping remains uninterrupted, the abrupt cancellation of scheduled talks in Switzerland has added a layer of risk. Any breakdown in these negotiations could trigger sudden volatility in global risk assets.

Energy Markets: Oil Price Volatility

The geopolitical friction in the Middle East is directly impacting energy commodities. Brent crude futures gained 0.9% to close at $80.57 a barrel, while West Texas Intermediate (WTI) saw a 1.23% rise. The uncertainty surrounding the durability of the interim peace agreement means oil prices remain sensitive to news flow. For the Indian economy, sustained higher oil prices could pose inflationary risks and weigh on the fiscal outlook.

The IT Sector Selloff

The Indian IT index is under significant pressure, acting as a primary drag on the broader market. Major players including TCS, Infosys, Tech Mahindra, and HCL Tech saw declines as much as 7% on Friday. This selloff follows a weak performance by global peer Accenture, which revised its FY26 revenue growth guidance downward to 3-4% from 3-5%. Technical indicators for the IT sector suggest bearish momentum, with the index trading below key moving averages.

Rupee Stability and FII Activity

On the domestic front, there are pockets of optimism. The Indian Rupee, despite recent volatility, recently recorded its strongest weekly performance in 11 weeks, supported by RBI measures aimed at attracting dollar inflows. Additionally, Foreign Institutional Investors (FIIs) have turned net buyers, bringing in cumulative inflows of approximately ₹3,400 crore last week. This, combined with ₹7,100 crore in purchases by Domestic Institutional Investors (DIIs), provides a crucial cushion against global selling pressure.

Technical Outlook for Nifty

Despite the recent dip, the broader trend for the Nifty remains positive as it holds above its 20-day and 50-day exponential moving averages (EMA). Analysts suggest that the 23,800–23,850 zone serves as critical immediate support. A decisive break below this could lead to a slide toward 23,500, whereas a sustained move above the 24,200 resistance could pave the way for a rally toward 24,500.

Key Takeaways

  • Geopolitical Risk: The stability of the US-Iran peace process and news regarding the Strait of Hormuz remain the primary drivers of global market volatility.
  • IT Sector Pressure: Weakness in global IT spending, highlighted by Accenture's revised guidance, continues to weigh heavily on Indian tech heavyweights.
  • Institutional Support: The return of FIIs as net buyers, coupled with steady DII participation, provides a vital safety net for domestic equities.