Week ahead: Inflation data, Q1 earnings, US-Iran peace talks, FIIs activity among key market triggers to watch

Indian markets continued to recover for a second consecutive week. The NIFTY50 index rose around 0.7 %, closing at 24,570, while the SENSEX rose by approximately 0.5%, settling at 78,499. Markets started the week strongly, with a sharp correction in crude oil prices, improved U.S.–Iran relations, Foreign Institutional Investor (FII) buying. This led to NIFTY50 index closing above 24,700 mark for the first time since March.

However, profit-booking emerged after Monday’s rally, while the RBI policy decision produced a muted reaction. The central bank kept the repo rate unchanged at 5.25% and maintained a neutral stance. However, it raised its FY27 GDP forecast to 6.7% and lowered its inflation projection to 5 %. Meanwhile, the new Closing Auction Session also produced unusual volatility and divergence between the NIFTY50 and Sensex during the week.

Broader markets continued the outperformance against the benchmarks since April 2026, with NIFTY Midcap 150 index rising 0.9% and Smallcap 250 index jumping 2.4%. Sectorally, PSU Banks (+5.0%), Defence (+4.3%) and Metals (+3.7%) showed relative strength during a muted week. Capital Markets index (-1.9%), Real-Estate (-1.7%) and Private banks (-0.5%) remained under pressure.

July sales provided further support. Passenger-vehicle dispatches increased around 33% year-on-year to nearly 4.7 lakh units. Stock-specific momentum was strong with Samvardhana Motherson (+11.8%), Ashok Leyland (+6.8%), Sona BLW Precision (+6.3%), Hero MotoCorp (+6.3%) and Mahindra & Mahindra (+3.0%) being the strong performers.

In the U.S, July's consumer inflation data will be the most significant global trigger. The CPI data on Wednesday will indicate whether inflation is easing sufficiently following weaker labour market data. Producer inflation on Thursday and retail sales on Friday will offer further insights.

Amid elevated bond yields, the U.S. Treasury’s 10-year note auction on Wednesday will also be closely watched. Weak demand at the auction could push the 10-year yield higher, strengthening the dollar and putting pressure on global equities.

Meanwhile,OPEC+ approved a production-target increase of 1.88 lakh barrels per day for September, completing the rollback of its 2023 voluntary cut. However, actual supply remains constrained by Middle East and Ukraine-related disruptions.

Market breadth

Market breadth improved further during the week, with 68% of NIFTY50 stocks trading above their 50-day moving average. The reading has increased from 62% in the previous week, indicating broader participation in the recovery. Sustaining above 50% would support the bullish structure.

Foreign investors positioning

During August, the Foreign Institutional Investors remained net buyers in the cash market, purchasing equities worth ₹2,887 crore. In the derivatives market, as of 7 August, FIIs remained net short by around 1,50,000 index-futures contracts. This cautious positioning could limit the market's potential for growth, although reducing these short positions could accelerate the rally through short covering.

NIFTY50 outlook

NIFTY50 index is sustaining above the 200-day exponential moving average (EMA) following the recent breakout. The index is also trading above its 20-day and 50-day EMA, keeping the short-term structure positive. Meanwhile, the ADX reading of 14.31 indicates that the trend is still gaining strength.

Immediate resistance is placed at 24,774. A decisive close above this level could extend the rally towards 25,000. On the downside, the 24,400–24,428 zone, which includes the 200-day EMA, will be the key support. As long as this zone holds, weakness may be treated as a retest of the breakout. A close below 24,400 could extend the pullback towards 24,135.

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