The October series has turned out to be one of the strongest in recent months, with the Sensex up nearly 4.6% month-to-date. The rally was powered by heavyweight banking stocks, renewed foreign institutional investor inflows, and buoyant global cues amid expectations of a US Federal Reserve rate cut.
The week saw the Nifty 50 and Sensex post gains of 1.7% and 1.8% respectively, settling at 25,710 and 83,952 levels. The festive cheer extended to the IPO market, where LG Electronics India made a spectacular debut with a 50% premium over its IPO price at Rs 1,710.1 per share on the NSE.
Institutional flows remain the backbone of the uptrend. During the week, domestic institutional investors net bought to the tune of Rs 16,247 crore, while foreign institutional investors injected Rs 556 crore. Yet the dynamics are more nuanced: on a month-to-date basis, FIIs registered a marginal net outflow of Rs 586 crore in cash, even as they maintained net long positions worth Rs 2,729 crore in index futures, suggesting tactical positioning rather than sustained conviction.
The rally was underpinned by strength in consumption-driven sectors and a broad-based recovery across realty, healthcare, and banking. Investor confidence was further buoyed by easing concerns around asset quality in the financial sector and expectations of improved volume growth in the festive quarter.
“Looking ahead, the trajectory of Indian equities will be shaped by the ongoing earnings season and policy signals from major global central banks. Market optimism was bolstered by clarity in India–US trade relations, with both sides tentatively agreeing to conclude the first phase of the deal by November,” Vinod Nair, Head of Research at Geojit Financial Services, said.The market has also been bolstered by clarity in India-US trade relations. Both sides have tentatively agreed to conclude the first phase of the deal by November, providing a constructive backdrop for domestic equities. Additionally, a strengthening Indian rupee and improving liquidity conditions have helped insulate the domestic market from external headwinds.The technical setup remains constructive, at least for now. Amol Athawale, VP Technical Research at Kotak Securities, notes that “the short-term market texture is bullish,” with indices holding a higher high and higher low series formation on daily and intraday charts. On weekly charts, a long bullish candle has formed, supporting the possibility of further uptrend from current levels.
However, Athawale adds a crucial warning: “Due to temporary overbought conditions, some profit-booking may occur at higher levels.” For traders, key support zones are pegged at 25,550-25,350 for Nifty and 83,000-82,400 for Sensex, while resistance levels stand at 26,000/84,400 and 26,300/85,300. Bank Nifty traders should watch the 57,000 level closely; a break below it could trigger a broader unwinding.
Ponmudi R, CEO at Enrich Money, highlights a potential vulnerability: while domestic investors remain firmly anchored to the uptrend, FIIs are net short Rs 8,247 crore in stock futures, suggesting “selective portfolio adjustments rather than widespread exits.” This selective positioning could accelerate profit-taking if market momentum stalls.
The week ahead will test investor resolve with a truncated trading calendar on account of Diwali, but not before delivering several critical catalysts. Quarterly earnings from heavyweights such as Reliance Industries, HDFC Bank, and ICICI Bank are expected to set the tone for the broader market. The earnings season will continue in full swing with results from Colgate, Hindustan Unilever, Dr. Reddy’s Laboratories, SBI Life Insurance, Coforge, and Kotak Mahindra Bank scheduled to report.
October 21 will see the one-hour Diwali Special Muhurat Trading session, marking the beginning of Samvat 2082, which will be closely watched for sentiment cues and festive cheer.
According to Ajit Mishra, SVP Research at Religare Broking, “The market enters the new week with an optimistic outlook. Cooling inflation, robust domestic macro fundamentals, and strong earnings momentum offer a constructive setup for the medium term.” However, he emphasizes that “investors should stay vigilant to external risks, including global trade tensions and geopolitical developments, which could lead to short-term volatility.”
The prescription from analysts is clear: adopt a buy-on-dips approach with a focus on sectors demonstrating consistent earnings visibility—particularly banking, FMCG, and consumer durables. Within the broader market, preference should be given to fundamentally sound large and midcap stocks over smallcaps. IT and export-oriented stocks may remain volatile amid global uncertainty.
For now, the Diwali rally is real, but its durability hinges on earnings quality, global central bank actions, and whether the technical overbought conditions can be managed without a significant correction. Investors should celebrate the festive gains, but keep their portfolios hedged for the unexpected.