Will Sensex and Nifty Bounce Back? 5 Key Factors Driving Markets

After a five-session winning streak, the Indian equity market faced a sharp reversal on Friday, with the Sensex plunging 607 points to settle at 76,802.90. As investors eye a potential recovery this week, several geopolitical and domestic factors are set to dictate whether the Sensex and Nifty50 can reclaim their recent highs.

Geopolitical Tensions and the Oil Factor

The fragile peace process between the United States and Iran is casting a shadow over global markets. Despite a 60-day ceasefire agreement brokered by Pakistan, tensions spiked following claims by Iran's IRGC regarding the closure of the strategic Strait of Hormuz. While the U.S. military maintains that commercial shipping remains uninterrupted, the cancellation of scheduled talks in Switzerland has fueled uncertainty.

This geopolitical instability is directly impacting energy markets. Brent crude futures rose by 0.9% to close at $80.57 a barrel, while WTI futures gained 1.23% to $77.54. Any escalation in Middle Eastern tensions could lead to a spike in oil prices, posing a risk to India's fiscal deficit and inflationary pressures.

The IT Sector Selloff

The Indian IT sector remains a significant drag on market sentiment. On Friday, heavyweights like Infosys, TCS, Tech Mahindra, and HCL Tech tumbled by as much as 7%. This domestic weakness follows a bruising session on Wall Street, where Accenture's shares slid 11% after the firm lowered its FY26 revenue growth guidance to a range of 3-4% from the previous 3-5%.

Technical indicators for the IT index show bearish momentum, with the RSI slipping below 40 and the DI- crossing above DI+. Investors should watch the 27,050–27,000 support zone closely; a breach below this could trigger further downside.

Rupee Resilience and Institutional Flows

Despite global dollar strength, the Indian rupee has shown remarkable resilience, recording its strongest weekly performance in 11 weeks. Closing at 94.32 per dollar, the currency has been bolstered by recent RBI measures designed to attract dollar inflows. Some analysts even forecast a potential strengthening toward the 93.50 mark.

Adding to the positive sentiment is the return of Foreign Institutional Investors (FIIs). FIIs turned net buyers last week, bringing in approximately Rs 3,400 crore. This was complemented by Domestic Institutional Investors (DIIs), who purchased shares worth roughly Rs 7,100 crore, providing a crucial cushion against volatility.

Technical Outlook for Nifty

While the recent selloff was sharp, the broader trend for the Nifty remains cautiously positive as it trades above its 20-day and 50-day exponential moving averages (EMA).

For Nifty, the immediate support zone lies between 23,850 and 23,800. A decisive break below 23,800 could see the index slide toward 23,500. On the upside, the 24,150–24,200 resistance zone must be breached to trigger a fresh rally toward the 24,500 mark.

Key Takeaways

  • Geopolitical Risk: Uncertainty surrounding the US-Iran peace deal and the status of the Strait of Hormuz is driving volatility in crude oil prices.
  • IT Sector Pressure: Weak guidance from global peers like Accenture is weighing heavily on Indian IT stocks, requiring a technical rebound to regain momentum.
  • Institutional Support: The combined buying strength of FIIs (Rs 3,400 crore) and DIIs (Rs 7,100 crore) remains a primary pillar of support for the domestic market.