Nifty, Sensex post second weekly loss as foreign fund outflows and weak global cues weigh on markets

Indian equity markets ended the week lower for the second consecutive time, dragged down by persistent selling from foreign institutional investors and weak global sentiment. The slide came even as domestic indicators pointed to a steady economic recovery.

The Nifty closed the week 0.71 per cent lower at 25,492, while the Sensex fell 1.65 per cent to settle at 83,216. Market sentiment turned cautious after global reports suggested the US Federal Reserve was unlikely to cut interest rates soon, dampening appetite for risk assets.

Foreign selling, global factors hit sentiment

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Persistent foreign fund outflows remained a key drag on Indian equities. Market observers said several overseas investors shifted money to markets offering lower valuations, as India’s premium pricing made its equities less attractive in the short term.

Sectorally, IT and metal stocks led the decline, while select public sector banks found support on the back of strong quarterly results, improving asset quality, and talk of a potential rise in foreign direct investment limits in the banking sector.

“State-run banks have been among the bright spots this season, with consistent profit growth and stable balance sheets,” said Vinod Nair, Head of Research at Geojit Financial Services, adding that optimism around consolidation within the sector also helped sentiment.

Expensive valuations, steady outlook

Indian equities continue to trade at premium valuations, with the Nifty currently priced above 20 times the estimated FY27 earnings - slightly higher than the 10-year average price-to-earnings ratio. Market watchers noted that while valuations remain stretched, they are supported by India’s long-term growth prospects and policy-driven momentum.

Earnings growth in FY25 is expected to moderate to around 5 per cent, leading to some caution among investors. However, domestic inflows and stable macro indicators such as robust tax collections and sustained capital expenditure continue to support market confidence.

Despite recent weakness, several market participants view the correction as healthy, suggesting that the broader outlook remains positive if inflation stays under control and global risk sentiment stabilises.

Support and resistance levels in focus

Nifty support is seen around the 25,400 zone, while resistance lies near 25,600. A sustained move above the resistance could open the door for recovery in the coming sessions. Expectations of resilient corporate earnings and a rebound in foreign inflows could lift sentiment once global uncertainty eases.