Indian equity markets are positioned for a mildly positive yet range-bound opening, with Gift Nifty at 26,390 signaling a positive start of approximately 50 points. Market participants are preparing for a session dominated by weekly options expiry flows and growing anticipation around the Q3 earnings season.

Market Sentiment and Key Drivers

According to Ponmudi R, CEO of Enrich Money, domestic equity markets are set for cautious optimism with underlying support from stable macro fundamentals. "Market attention is expected to centre on weekly options expiry-related flows and evolving expectations around the upcoming Q3 earnings season," he noted. The broader sentiment remains guarded amid recent volatility driven by geopolitical developments and tariff-related concerns.

Foreign Investment Concerns and Policy Watch

Analysts have highlighted selling by foreign portfolio investors as a significant concern for market stability. The focus has intensified on US President Donald Trump's policy moves, particularly regarding tariffs, which market participants are monitoring closely for potential impact on global trade dynamics.

Government Spending and Sectoral Performance

Government capital expenditure demonstrates healthy momentum in 8MFY26, with defense spending leading the charge. Railways sector is expected to witness increased activity over the coming quarters, supporting the overall capex narrative.

Technical Analysis and Market Outlook

Siddhartha Khemka, Head of Research at Motilal Oswal Financial Services, expects markets to maintain firmness with positive bias. This optimism stems from better-than-expected Q3 business updates and expectations of capex pickup ahead of the Union Budget, though volatility may persist due to global geopolitical developments.

Technical indicators reveal elevated market stress, with India VIX rising 6.06% to 10.02 during the session. Aakash Shah, Technical Research Analyst at Choice Broking, emphasizes that a sustained close above the 26,300 zone would be crucial for reviving bullish momentum in the Nifty.

Global Market Context

Asian stocks displayed mixed performance in early trading, despite a strong overnight close in US markets. This divergence reflects the cautious approach adopted by regional investors amid ongoing global uncertainties and policy developments.

Indian equity markets faced significant volatility on Monday as geopolitical concerns weighed on investor sentiment. The Nifty reached a fresh peak of 26,373.20 during the session before witnessing profit-booking toward the close, ending at 26,250.30, down 0.30%. The decline was primarily attributed to concerns over US military strikes against Venezuela carried out over the weekend.

Technical Outlook Remains Bullish

Despite Monday's decline, market analysts maintain a positive near-term outlook for the Nifty. The index continues to trade well above its key moving averages, confirming the strength of the ongoing uptrend following last week's strong upward movement.

According to Shrikant Chouhan, Head Equity Research at Kotak Securities, key support levels lie between 26,150 and 26,100, while immediate resistance is positioned at 26,350 and 26,400. "The intraday market texture is volatile; hence, level-based trading would be the ideal strategy for day traders," Chouhan noted.

Bank Nifty Shows Resilience

The Bank Nifty demonstrated strength by touching a record high during opening trade before profit-booking at elevated levels led to marginal losses. Bajaj Broking Research highlighted that a follow-through strength above Monday's high of 60,437 could open further upside toward 60,700 initially, followed by 61,400 levels from a short-term perspective.

On the downside, immediate support for Bank Nifty is placed at 59,500 levels, while key short-term support lies at 59,000-58,800 levels.

Market Performance and Broader Trends

The session reflected mixed sentiment as optimism over healthy third-quarter business updates from financial and other companies was tempered by caution surrounding geopolitical developments. In the broader market, the Nifty Midcap100 ended 0.20% lower, while the Nifty Smallcap100 outperformed with a gain of 0.50%.

Bajaj Broking Research observed that the index has formed a small bearish candle, signaling consolidation at all-time highs after the previous week's strong upward movement. However, the technical structure remains supportive of further gains.

Trading Strategy and Outlook

Market experts recommend maintaining a cautious yet opportunistic approach in the current environment. Rajesh Bhosale, Equity Technical Analyst at Angel One, advised traders to "maintain a stock-specific and thematic approach to capture outperformance." He emphasized the importance of monitoring global and geopolitical developments closely, as they may drive short-term volatility in the markets.

The consensus among analysts suggests that while near-term volatility may persist due to external factors, the underlying technical structure supports a bullish outlook for Indian equities, particularly if key resistance levels are decisively breached.