Key Highlights

  • Second winning week: Nifty gained 2.78 per cent and Sensex 3.11 per cent during the week; on Friday, Nifty closed at 23,146 and Sensex at 74,729.
  • Rupee turnaround: The RBI’s special dollar window for oil marketing companies and tighter hedging norms helped the rupee rebound, lifting market confidence.
  • IT leads, FMCG lags: IT emerged as the top performer on strong earnings, while FMCG and pharma came under pressure.
  • FII selling slows: Foreign investors’ weekly selling fell sharply to Rs 89.91 billion from Rs 302.94 billion, and they turned net buyers on Friday.
  • Watch next: India’s October PMI, US jobless claims and Japan’s inflation data will guide market direction.

Indian equity markets ended the week on a confident note, stretching their recovery into a second straight week. The turnaround came even as inflation worries clouded the early sessions, with a timely intervention by the Reserve Bank of India to support the rupee proving to be the key turning point for investor sentiment.

How the Indices Closed

On the last trading day of the week, Nifty gained 0.65 per cent to settle at 23,146, taking its weekly gain to 2.78 per cent. Sensex rose 413 points, or 0.56 per cent, to close at 74,729, ending the week 3.11 per cent higher.

A Rocky Start to the Week

The rally did not come easily. Consumer inflation hovering near the upper end of the RBI’s tolerance band, followed by a hotter-than-expected wholesale price index print, pushed benchmark bond yields to multi-year highs. The central bank’s decision to raise the daily cash reserve ratio maintenance requirement to absorb surplus liquidity added another layer of caution.

The RBI Move That Changed the Mood

Sentiment shifted after the central bank opened a special dollar window for oil marketing companies and tightened hedging norms, which together drove a rebound in the rupee, analysts said.

“Expectations of a review of LTCG tax and STT, softer crude prices and easing bond yields further revived risk appetite, prompting investors to tilt towards counters with strong Q2FY27 business updates, though the rally remained concentrated in large-caps, with mid-caps posting modest gains and small-caps ending marginally lower,” they added.

Sector Scorecard: IT Shines, FMCG Stumbles

The information technology sector was the standout performer, backed by robust earnings and upbeat management commentary. Healthcare and pharmaceuticals lagged as investors moved towards sectors with stronger near-term earnings visibility, while FMCG stocks faced pressure over margin compression concerns from elevated input costs.

Broader markets moved largely in line with the benchmarks, with Nifty Midcap100 adding 0.58 per cent and Nifty Smallcap100 slipping 0.12 per cent during the week.

Why It Matters: Foreign Selling Is Cooling

Perhaps the most encouraging signal came from foreign institutional investors. FIIs turned net buyers of Rs 11.66 billion on Friday. Although they remained net sellers for the ninth straight week, their weekly outflow moderated sharply to Rs 89.91 billion from Rs 302.94 billion the previous week.

Domestic institutional investors stayed net buyers for a ninth consecutive week at Rs 78.13 billion, though they turned net sellers of Rs 36.61 billion on Friday. The narrowing gap between foreign selling and domestic buying suggests the market’s heavy dependence on local money may be easing.

Analysts Urge Caution

“Participants should remain selective, maintain disciplined position sizing and favour a hedged approach amid elevated macroeconomic and earnings-related uncertainty,” the experts said.

Analysts noted that the durability of the recovery will depend on earnings growth spreading beyond IT, with revenue and margin delivery across financials, consumption and industrials under close watch.

What Comes Next

Investors will now track India’s October PMI for clues on domestic demand momentum. On the global front, US jobless claims and Japan’s inflation print are expected to shape interest rate expectations, which could decide whether this two-week rally gains further strength or pauses for breath.