Indian equity markets are expected to open on a positive note following a technical bounce-back after recent sharp sell-offs, though several headwinds continue to challenge market sentiment. Analysts point to sustained foreign portfolio investor (FPI) selling and underwhelming third-quarter performance by some index heavyweights as key factors likely to keep markets under pressure.

Global Sentiment Improves Market Outlook

The improved global tone stems from easing trade and geopolitical concerns, which has lifted risk appetite worldwide. US President Donald Trump's softer stance on Greenland has contributed to positive sentiment across global markets. This shift in global risk appetite has triggered a rebound in risk assets while prompting some profit-taking in safe-haven assets like gold and silver.

Ponmudi R, CEO of Enrich Money, noted that the improved global environment may help stabilize domestic markets after two consecutive sessions of sharp selling, though investors are likely to remain cautious in their approach.

Key Market Challenges Persist

Despite the positive opening expectations, several significant challenges continue to weigh on market sentiment:

The rupee's decline to fresh record lows has intensified concerns around imported inflation and capital outflows. Meanwhile, earnings recovery has been slower than anticipated, with elevated valuations undergoing a time-wise correction rather than experiencing a sharp price-led decline.

Volatility Indicators Signal Caution

Market volatility has increased significantly, with India VIX surging nearly 20% over the last three sessions. This surge reflects rising uncertainty driven by multiple factors including global macro risks, earnings volatility, and currency pressure.

The derivatives market continues to send weak signals, according to Dhupesh Dhameja, Derivatives Research Analyst at SAMCO Securities. Call writers have aggressively added fresh positions at at-the-money and nearby strikes, effectively capping near-term upside potential.

Market Positioning and Outlook

The Put-Call Ratio (PCR) has risen to 0.68 from 0.58, indicating elevated caution and continued dominance of call writers. Put writers have concentrated their positions at lower strikes, suggesting market expectations of range-bound movement with limited immediate downside.

Market participants are closely monitoring FPI positioning, which remains in oversold territory. Focus is also shifting toward the EU-India trade deal developments and upcoming Budget expectations, with gradual building of expectations around potential capital expenditure and policy support measures. However, near-term sentiment remains defensive and highly selective, with global political developments and US policy rhetoric likely to influence market volatility in the immediate term.

Indian stock market benchmark indices are expected to open higher on Thursday, tracking a global market rally amid easing geopolitical tensions. The Gift Nifty was trading around the 25,362 level, representing a premium of nearly 184 points from the Nifty futures' previous close, indicating a gap-up start for domestic markets.

Wednesday's Market Performance

The previous trading session saw Indian markets end lower amid high volatility, with both benchmark indices closing below key psychological levels.

Sensex Technical Outlook

Technical analysts note that Sensex formed a long-legged Doji candlestick pattern on daily charts, indicating indecisiveness between bulls and bears. Shrikant Chouhan from Kotak Securities suggests level-based trading as an ideal strategy given the current market volatility.

Mayank Jain from Share.Market highlights that the technical structure remains weak as Sensex continues trading below short-term moving averages. The ₹81,100 zone has emerged as a primary demand area, with a breach potentially opening doors for a slide toward ₹80,500.

Nifty 50 Analysis and Key Levels

The Nifty 50 index formed a doji candle with wicks on both sides, reflecting ongoing market indecision. Nagaraj Shetti from HDFC Securities notes this pattern typically calls for reversal confirmation after a reasonable decline.

The ₹25,000 mark serves as a vital psychological base, with the highest Put Open Interest concentrated at this level. Aggressive Call writing at the ₹25,500 strike suggests this level will act as a major barrier to upward momentum.

Nilesh Jain from Centrum Broking notes that the Relative Strength Index has entered deeply oversold territory at 28.00, suggesting potential for a short-term pullback. However, the broader trend remains weak as long as Nifty trades below its 100-day moving average at ₹25,580.

Bank Nifty Technical Structure

Bank Nifty showed the most significant weakness, ending 1.02% lower and forming a clear lower-high, lower-low structure on intraday charts. The index consolidated between ₹58,800-₹59,000, highlighting persistent supply at higher levels.

Sudeep Shah from SBI Securities points out that momentum indicators continue weakening, with RSI in declining mode near the 40.00 level. The probability of a strong pullback remains limited unless Bank Nifty decisively reclaims its 50-day EMA.

Market Volatility Indicators

The India VIX rose by 7.00% to close at 13.60, indicating increased market uncertainty and contributing to the prevailing cautious sentiment among traders and investors.

While Gift Nifty indicates a positive opening, analysts emphasize that the underlying technical structure remains fragile, with key support levels requiring defense to prevent further downside momentum.