Stock Market Next Week: Reversal in FII outflows may give markets a vital boost

The Indian stock market remained largely range-bound this past week, ending with slight losses as global trade tensions and foreign capital outflows weighed on investor sentiment. Despite some initial gains, the market struggled to hold onto momentum, leading to a week of cautious trading.

Market Performance This Week

On Thursday, the BSE Sensex dropped 200.85 points (0.27%) to close at 73,828.91, marking its fifth straight session of decline. Similarly, the NSE Nifty fell by 73.30 points (0.33%) to settle at 22,397.20.

Ajit Mishra, SVP of Research at Religare Broking Ltd, noted, “Markets traded in a narrow range, showing a consolidative tone amid mixed global cues. The Nifty and Sensex posted losses of over half a percent, closing at 22,397.2 and 73,828.91, respectively.”

Sectoral Trends

Most sectors ended in the red, with IT, auto, and realty stocks facing the sharpest declines. However, financial and pharmaceutical stocks managed to hold steady. The broader markets also saw selling pressure, with midcap and smallcap indices losing between 2.15% and 4%.

Key Market Drivers for Next Week

All eyes are on the U.S. Federal Reserve’s monetary policy meeting on March 19. While recent inflation data has been positive, uncertainty around an interest rate cut remains due to ongoing trade tensions. The Fed’s statements will play a key role in shaping market expectations.

Domestically, investor focus is on Foreign Institutional Investor (FII) activity. So far in 2025, FIIs have pulled out over ₹1.1 lakh crore from Indian equities, contributing to a 4% decline in the Nifty index year-to-date. A reversal in FII outflows could provide a much-needed boost to the markets.

Technical Outlook for Nifty

Mishra explains that Nifty is currently consolidating within a range of 22,250 to 22,650. “A breakout above this range could push the index towards 23,100 or higher, while a breakdown could see it testing 21,800,” he said.

For Bank Nifty, he highlighted that while the banking sector has shown resilience, the index must close above its 20-day exponential moving average of 48,600 to regain strength and test the 50,000 mark. If it falls below 47,500, a sharp correction could follow.

Trading Strategy for Next Week

Market experts advise investors to stick with high-quality stocks that have attractive valuations for medium- to long-term investments. SBI Securities noted, “Despite recent corrections, we remain cautiously optimistic. Investors should focus on quality businesses with supportive valuations.”

Mishra recommends traders focus on option strategies in index trading until a clear breakout is seen. “A stock-specific approach is advisable, with a preference for financials, energy, and metals on the long side. IT and auto sectors may continue to underperform,” he added.

He also cautioned investors about broader market volatility, advising against aggressive positions in mid- and small-cap stocks.

Disclaimer: Investors should consult certified experts before making any investment decisions.