Union Budget expectations, Q3 earnings, 6 other factors that may shape this week’s action on D-St

Indian benchmark indices came under heavy selling pressure during the week, with the Nifty 50 sliding over 2.5% to close at 25,048, while the BSE Sensex declined nearly 2.4% to end at 81,537.

The sell-off was broad-based, with all sectoral indices finishing lower and midcap and smallcap stocks seeing notable wealth erosion. The downturn in domestic equities was driven by a confluence of ongoing global and domestic headwinds.

Here are the factors that could shape market direction in the upcoming week:

1. Q3 earnings: Underwhelming and cautious Q3 earnings commentary from several corporates emerged as a key trigger, weighing heavily on market confidence so far. With results from companies such as Axis Bank and ACC due next, investors will closely watch how the market reacts to further earnings cues.

2. Expectations from Union Budget: As we head into the Budget week, volatility is expected to remain elevated, with the possibility of sharp swings on either side for the index as market participants position themselves according to expectations ahead of the Finance Minister’s speech on February 1.

3. US trade concerns with economies: Globally, renewed trade concerns between the U.S. and major economies, particularly Europe, further added to uncertainty.4. Geopolitical tensions: Adding to the risk-off sentiment, escalating geopolitical tensions in the Middle East—especially the recent developments involving the U.S. and Iran—kept global markets on edge.5. Crude oil supply: Rising fears over potential disruptions in crude oil supply routes and increased military posturing have heightened volatility across asset classes.

6. Technical factors: Analysts suggest that traders remain highly selective and clearly define exit strategies.

“In terms of levels, the sharp bounce seen from the 24,900 mark on Wednesday now acts as immediate support for the monthly expiry. A break below this could open the door toward the next major support zone of 24,600–24,500, where multiple bottoms were formed during the start of the October–November rally,” said Rajesh Bhosale, Equity Technical Analyst, Angel One.

He added, “On the upside, given the recent vertical fall, identifying strong resistance is challenging; however, the intra-week high zone of 25,350–25,450 is seen as immediate resistance, followed by a stronger hurdle near 25,600, which coincides with a cluster of moving averages and retracement levels.”

7. INR movement: Rupee continues to trade weakly as persistent FII selling in the secondary markets continues to weigh on the currency. While domestic macro fundamentals remain relatively stable, elevated global uncertainties, including US trade tariff actions and geopolitical tensions around Greenland, Venezuela and the Russia-Ukraine conflict, are keeping sentiment cautious.

“The rupee is expected to remain under pressure in the near term, with a weak trading range of 91.35–92.25,” says Jateen Trivedi, VP Research Analyst – Commodity and Currency, at LKP Securities.

8. FII activity: From a flows perspective, FIIs remained persistent sellers, offloading equities worth Rs 14,652 crore, while DIIs provided meaningful support with net inflows of Rs 20,746 crore, helping cushion the broader downside, according to the data collated by Master Capital Services.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)