Banking, financials set to lead next leg of market rally: Ajit Mishra

Time of India

26-05-2025

'The long-term outlook for the
defence sector
is promising, driven by the government's push for indigenisation and the success of key initiatives. With an increasing focus on defence exports, new opportunities are opening up,' says
Ajit Mishra
, SVP–Research, Religare Broking, on sectors that could remain in focus going forward in the near term.
EXCERPTS:
by Taboola
by Taboola
Sponsored Links
Sponsored Links
Promoted Links
Promoted Links
You May Like
The Top 25 Most Beautiful Women In The World
Articles Vally
Undo
Q. The stock markets were on a seesaw, with markets alternating between gains and losses last week. Key triggers included Moody's downgrade of the US government's credit outlook and some movement in defence stocks. Could you help us break down what really drove last week's volatility?
Ajit Mishra:
Last to last week, markets had posted strong gains—around 4% in the
Nifty
and Sensex—on the back of global stability, positive news on the US–China trade front, and easing geopolitical tensions between India and Pakistan.
In the past week, however, we started on a sluggish note. Sentiment turned cautious due to global cues—Moody's downgrade of the US credit outlook, weak interest in US bonds, and fears that a new US tax bill might worsen their fiscal situation. All this led to pressure in the US markets, which in turn impacted us.
Live Events
Additionally, FIIs, who were consistently buying, turned net sellers this week. On the domestic front, there hasn't been any major trigger. So overall, it was global concerns that caused the volatility, and we closed the week on a flat note.
Q. What's your take on the near-term trend? Are we leaning more toward a bullish or bearish market in the coming weeks?
Ajit Mishra:
Despite the choppiness, the broader tone still looks positive. We've seen a recovery over the past month, and key sectors like
banking
and
financials
are holding strong. Even some rate-sensitive sectors are showing participation.
If you exclude this week's FII selling, domestic institutions are still buying consistently. So, while we may see some consolidation due to global uncertainties and upcoming data releases, the overall outlook remains positive with an upward bias.
Q. Which sectors look bullish in the near term, and which ones might underperform?
Ajit Mishra:
Banking and financials, after a brief consolidation, could lead the next leg of the up move. IT has also shown a rebound after underperforming for a while. Since these two sectors hold maximum weight in the index, their performance is critical.
We're also seeing renewed interest in energy, metals, and realty. On the flip side, sectors like auto, pharma, and IT may remain subdued next week. However, there could still be stock-specific opportunities even within these lagging sectors.
Q. The defence sector has seen a strong rally lately. From a long-term perspective—say 3 to 7 years—what should retail investors keep in mind?
Ajit Mishra:
The long-term outlook for defence is promising, thanks to the government's push for indigenisation and the success of several key initiatives. The focus is also shifting toward defence exports, which opens new opportunities.
For long-term investors, companies with strong export capabilities in defence are the ones to watch. Stocks like HAL and BEL hold a strong position in this space and are good candidates for a 3–5 year horizon or even longer.
Q. What key macroeconomic data points or global events should investors watch for this week?
Ajit Mishra:
The focus remains on the US. This week, we have the
FOMC meeting minutes
and US GDP data.
On the domestic front, India's quarterly GDP numbers will be released, and updates on monsoon progress will also be important. These factors, along with global trade developments and FII flows, will play a crucial role in setting the market trend.
Q. What are the key support and resistance levels for Nifty in the this week, and what is the current chart setup indicating?
Ajit Mishra:
After the recent rally, we were expecting some follow-up buying, especially from the banking sector. But that didn't happen, and we saw consolidation instead.
The good part is that Nifty tested its 20-day EMA support, which is currently around the 24,450–24,500 zone. As long as Nifty stays above 24,500, the positive bias remains intact, and we recommend a 'buy on dips' approach.
On the upside, Nifty could attempt 25,200 to 25,600. However, if it breaks below 24,500, the trend may turn sideways to slightly negative, with 24,100 acting as the next support.
Q. What advice or strategy could work for retail investors in this market?
Ajit Mishra:
If you're chasing momentum—like in defence or railway stocks—you must plan your exit strategy in advance. Don't assume that the rally will last forever. Trail your stop-losses and book profits when you can.
Also, focus on stocks that are relatively stronger—those trading near record highs—rather than those at 52-week lows, hoping they'll bounce back.
Sectors like banking and financials are showing strength, so stick with the outperformers. Be disciplined, avoid emotional decisions, and always have a well-thought-out plan for both entry and exit.