The Nifty staged a strong recovery, gaining 198 points to close at 24,625 after three consecutive sessions of losses. The rally was driven by India's Q1 GDP growth of 7.80%, which exceeded consensus estimates of 6.80% and marked the highest expansion in five quarters. Broader markets outperformed with Nifty Midcap 100 and Nifty Smallcap 100 rising 1.97% and 1.57% respectively.

Sector Performance

Auto and IT sectors led gains, with the Nifty Auto index surging nearly 3% on strong August sales numbers. Top performers included Bajaj Auto, Hero MotoCorp, Tata Motors, and Eicher Motors. 42 out of 50 Nifty stocks closed positive. Bank Nifty recovered after five consecutive losses, closing above 54,000 with a 0.65% gain.

Technical Analysis

Market experts identify key resistance at 24,710-24,740 levels, with support at 24,500-24,470. Technical analysts suggest the short-term trend has reversed upward but maintain a cautious 'sell on rise' sentiment below 24,850.

Key Levels to Watch

Market Outlook

While the current rally is significant, investors should remain cautious. The strong GDP data has provided a boost to market sentiment, but technical indicators suggest a potential for volatility. Traders are advised to watch the identified support and resistance levels closely in the coming sessions.

The outperformance of broader markets, particularly in the midcap and smallcap segments, indicates growing investor confidence beyond large-cap stocks. However, the sustainability of this trend will depend on upcoming economic data and global market cues.

Investors should keep a close eye on auto and IT sectors, which have shown particular strength in this rally. The recovery in Bank Nifty after a losing streak also warrants attention, as the financial sector often plays a crucial role in broader market movements.

Indian equities faced headwinds, marking their second consecutive month of losses. The Nifty index dropped 1.38%, resulting in its weakest two-month performance since early 2023. This decline can be attributed to a combination of factors, including U.S. tariff shocks, significant foreign fund outflows, and widespread profit-taking across various sectors.

U.S. Tariff Impact

A major blow to the Indian market came when the United States doubled its duties to 50% on Indian goods. This move, reportedly in response to India's oil purchases from Russia, has particularly affected export-oriented industries, adding pressure to an already strained market.

Foreign Investment Exodus

The market sentiment was further dampened by substantial foreign portfolio investor (FPI) withdrawals. FPIs pulled out approximately Rs 527.00 billion from Indian equities, signaling a cautious approach towards emerging markets amidst global economic uncertainties.

Economic Resilience Amid Market Turbulence

Despite the market downturn, India's economy demonstrated remarkable resilience. The GDP grew by 7.80% year-on-year in the June quarter, surpassing the consensus estimate of 6.70%. This growth was primarily driven by robust performance in the services sector, which expanded by 9.30%, and a significant 9.70% jump in government spending.

Upcoming GST Council Meeting

Market participants are closely watching the upcoming Goods and Services Tax (GST) Council meeting. The meeting is expected to discuss tax regime rationalization, with speculation around a potential three-tier structure that could benefit consumption and auto sectors.

Diplomatic Developments

In a significant diplomatic move, Prime Minister Narendra Modi met Chinese President Xi Jinping in Beijing, marking his first visit to China in seven years. This meeting has sparked interest in potential geopolitical and economic implications for both nations.

Market Outlook

Analysts anticipate continued market volatility in the coming months. The positive domestic growth factors are likely to compete with external headwinds, particularly those arising from ongoing trade disputes. The interplay between these conflicting forces is expected to shape market trends in the near term.

As India navigates through these challenging times, the resilience of its economy and the outcome of upcoming policy decisions will be crucial in determining the market's trajectory. Investors and market watchers will be keenly observing how the nation balances its domestic growth agenda with the evolving global economic landscape.