The Indian stock markets demonstrated remarkable strength last week, with both the Sensex and Nifty indices recording their most substantial weekly gains in four months. This upward momentum extended the winning streak to three consecutive weeks, signaling robust investor confidence in the Indian equity markets.

Key Market Highlights

The Sensex closed 485 points higher, while the Nifty rose by 125 points. Both indices touched their highest levels in a year during the trading week.

Sector Performance

The rally was broad-based, with several sectors contributing to the overall market gains:

Stock Spotlight

Top Gainers

• Nestle India
• Asian Paints
• Mahindra & Mahindra (M&M)
• Adani Ports

Underperformers

IT stocks faced headwinds following muted quarterly commentary:

• Infosys
• Wipro
• TCS

Banking and Oil & Gas

• HDFC Bank and ICICI Bank: Both gained about 1%
• Reliance Industries: Showed strength ahead of its quarterly results announcement

Market Breadth and Mid-Cap Performance

Despite the overall positive sentiment, some underlying weakness was evident:

• Mid-cap index underperformed with a modest 0.30% weekly gain
• Market breadth remained weak with an advance-decline ratio of 1:2

This indicates that the rally was primarily driven by large-cap stocks, suggesting a somewhat narrow market advance.

Conclusion

The Indian stock markets have shown resilience and strength, posting significant gains across major indices. However, the narrow breadth and underperformance of mid-caps suggest that investors should remain cautious and vigilant. As always, it's advisable to conduct thorough research and consider one's risk appetite before making investment decisions in this dynamic market environment.

The domestic market recovered strongly on Friday with the Sensex reaching a 4-month high, trading above 84,000. The Sensex gained 669.85 points (0.80%) to 84,137.51, while Nifty 50 climbed 188.20 points (0.74%) to 25,773.50, hitting a one-year high. Gains in Reliance Industries ahead of its earnings announcement offset declines in Infosys and Wipro, which fell on margin concerns despite strong results.

FMCG and consumer durables sectors led with 1-2% increases, while IT and media indices declined over 1%. Asian Paints, Bharti Airtel, Max Healthcare, Apollo Hospitals, M&M, ITC and Reliance were top gainers, while Wipro, Infosys, Power Grid, Tech Mahindra and Hindalco were among the biggest losers. Broader markets also gained with midcap and smallcap indices trading positively.

Amid this market rally, Mahesh Patil, Chief Investment Officer at Aditya Birla Sun Life AMC, has shared his outlook for the Indian markets. Patil discusses potential Nifty earnings growth and identifies sectors he believes may perform well.

Market Outlook

According to Patil, the Nifty earnings growth may accelerate from single digits to 12-13% over the next 12 months. He attributes this potential growth to several factors:

• Consumption recovery
• Monetary easing
• Reduced foreign investor outflows

Sectors Showing Signs of Improvement

Patil notes that sectors that previously underperformed are now showing signs of improvement:

Valuations and Foreign Allocations

After a period of underperformance, Patil views India's valuations as potentially attractive, with metrics reset to near long-term averages. He suggests this adjustment could potentially bring back foreign allocations to the Indian market.

Sectors Expected to Perform Well

Patil identifies several sectors that he believes may drive market performance:

Power Utilities: Potential Opportunity

Patil highlights power utilities, particularly thermal and transmission segments, as potential investment opportunities. This view is based on the reviving power capex cycle.

Investment Considerations

1. Portfolio Rebalancing: After gold's reported 60% return, Patil suggests considering rebalancing portfolios from gold to equities.

2. IT Sector: Despite ongoing headwinds, Patil views the IT sector as a potential contrarian buy opportunity.

As the Indian market continues to evolve, investors may want to consider these insights while making informed decisions about their portfolios. However, it's crucial to conduct thorough research and consult with financial advisors before making any investment choices.