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Informist, Friday, Aug. 22, 2025

Simran Rede

MUMBAI – Investors are likely to be cautious next week ahead of higher US tariffs set to kick in on Wednesday. The expiry of the monthly contract of the Nifty 50's monthly derivatives contract will also be a key point to monitor for the market, according to analysts. Possible reforms on the goods and services tax front may keep investor sentiment positive. 

The market has reacted positively to the proposed GST reforms. Prime Minister Narendra Modi's announcement to review the indirect tax regime and next-generation reforms to kick in by Diwali took the market nearly 1% higher since Monday. Traders booked profits on Friday after this rally but analysts said market sentiment remains positive.

On Friday, the Nifty 50 closed at 24870.10, down 213.65 points or 0.9%. The BSE Sensex ended at 81306.85 points, down 693.86 points or 0.9%. Both indices, however, still closed positive for the second successive week after having fallen six weeks in a row. Going ahead, the Nifty 50 will move in a range next week, Vipin Kumar, assistant vice-president and senior derivatives analyst at Globe Capital Market, said. He pegged resistance for the index at 25160-25225 points and immediate support in a range of 24850-24670 points.

"Following a steady rally, the index paused on Friday, hinting at a brief consolidation before resuming its upward move. It remains well above the 50 EMA, reinforcing the short-term positive outlook," Bajaj Broking said in a note. The Nifty Bank is likely to continue its downward trend, with the index moving towards 55000–54900 points, it said. If the index breaks this level, the next support is seen at 54000 points. The Nifty Bank closed at 55149.40 points, down 1.1%, on Friday.

So far in August, foreign investment flows have been mixed for all key emerging markets. Consumption-oriented sectors and stocks rallied in the domestic equity market, following the government's announcement of plans to rationalise existing GST rates. On the macro front, minutes of the Monetary Policy committee's last meeting highlighted the need for a pause to allow the transmission of policy actions, while remaining wary of evolving external sector uncertainties. FPI flows are expected to remain volatile.

On the valuations of the Nifty 50, Dhananjay Sinha of Systematix Institutional Equities, said in a report, "...high volatility (due to trade tensions), elevated risk-free rates (on the back of higher inflation, rising unemployment, and dollar weakness), and subdued earnings growth suggest that Nifty 50 valuations (trailing PE, currently at 22x) will likely hover below historical averages (pre-COVID at 24). Market performance may remain uneven, complicating alpha generation and reinforcing sector rotation." 

On the global front, Prime Minister Narendra Modi is scheduled to visit China to attend the Shanghai Cooperation Organisation Summit in Tianjin on Aug. 31 and Sept. 1. The meeting comes amid instability between India and the US due to tariff concerns and uncertainty around a trade deal. Additionally, a slew of economic data from other Asian and European countries will also weigh on the outlook for the domestic market. These data sets include the UK's consumer confidence index for August and monthly retail sales for July, Japan's employment print and CPI data, and Germany's GDP data for the June quarter.  End

Edited by Avishek Dutta

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