Q2 GDP data, global cues… What will drive domestic markets in the coming week?

The domestic equity markets enter a crucial week with investors preparing for a heavy macroeconomic calendar, led by India’s second-quarter (Q2) GDP print and key global signals that will shape sentiment in the days ahead. After closing the previous week with modest gains, benchmarks are expected to take direction largely from economic data, currency movement and the broader global risk environment.

Both Nifty and Sensex ended last week 0.68 and 0.50 per cent higher at 26,068 and 85,231, respectively, supported by strong corporate earnings, easing inflation and steady optimism surrounding India–US trade discussions. Market breadth, however, remained mixed as mid- and small-cap indices lost ground, reflecting selective participation.

What will guide market sentiment this week?

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The release of the Q2 FY26 GDP figures towards the end of the week will be the most significant domestic trigger, offering clarity on the pace of economic activity between July and September. Industrial production data, which has shown early signs of stabilisation, will also be closely watched for confirmation of sustained momentum in manufacturing and consumption.

Foreign fund flows remain another key variable. Overseas investors continued to reduce exposure to Indian equities in recent weeks, although the pace of selling moderated slightly. Currency movement will be monitored after the rupee slipped to fresh lows last week, adding a layer of caution to the broader market environment.

Globally, investors remain sensitive to cues from US economic data, Federal Reserve commentary and geopolitical developments. Any swing in global risk appetite, particularly driven by bond yields or commodity prices, is likely to have a direct bearing on domestic equities.

Benchmarks hold ground as technical structure stays intact

Nifty’s close above the psychological 26,000 level last week signalled firmness, with buyers defending higher zones despite bouts of volatility. The index continues to trade above its 20-day, 50-day and 200-day moving averages, maintaining a constructive undertone and room for further upside if support zones hold through the week.

Sensex displayed similar resilience, with banking, auto, IT and consumption stocks providing steady traction. IT shares, despite pressure from weak US tech sentiment, ended as the top weekly gainer, reflecting stock-specific strength. Auto and services sectors followed with consistent buying interest.

Broader markets lagged, with the Nifty Midcap100 falling 0.76 per cent and Smallcap100 losing 2.2 per cent. Investors turned selective, preferring companies with clear earnings visibility as global uncertainty kept risk appetite in check.

Rupee pressure, global mood may keep trade range-bound

The recent weakness in the rupee, triggered by choppy global markets and jittery currency flows, may keep investors cautious at the start of the week. If volatility persists, markets could see mild profit-taking at higher levels. However, dips are expected to attract buying interest as long as benchmarks respect their key support zones.