Indian benchmark indices closed lower on Friday as investors engaged in profit-taking near record highs, with thin year-end trading volumes and continued foreign outflows dampening market sentiment. Despite the session's decline, both indices managed to snap their three-week losing streak with modest weekly gains.

Friday's Market Performance

The market pullback was broad-based with major indices ending in negative territory:

The Nifty slipped below the 26,050 mark during the session, reflecting cautious investor sentiment as the year draws to a close.

Sectoral Performance and Stock Movements

Among Sensex constituents, several heavyweight stocks led the decline:

Top Sensex Decliners:

• Bajaj Finance: 1.0-1.5% decline
• Asian Paints: 1.0-1.5% decline
• Eternal: 1.0-1.5% decline
• Sun Pharma: 1.0-1.5% decline
• Tech Mahindra: 1.0-1.5% decline

Sectoral performance remained mixed, with metals and consumer durables showing selective strength, while IT, auto, and banking sectors witnessed sustained selling pressure.

Weekly Performance Highlights

Despite Friday's decline, the week marked a significant turnaround for benchmark indices:

Defence and metal stocks emerged as sectoral leaders during the week, each rising nearly 3.00%, providing crucial support to broader market indices.

Market Dynamics and Expert Analysis

According to Vinod Nair, Head of Research at Geojit Investments, domestic equities faced pressure from multiple factors. "Thin year-end trading volumes and a cautious mood ahead of upcoming earnings prompted broad-based profit booking," Nair explained. He noted that optimism around the Santa Claus rally has diminished amid the absence of fresh catalysts, while continued foreign institutional investor outflows weighed on the Indian rupee.

The market expert highlighted that large-cap stocks underperformed their mid and small-cap counterparts, though selective strength persisted in specific sectors. The performance divergence reflects ongoing sector rotation as investors position themselves for the upcoming earnings season and new year trading.

Market Outlook

The session's light participation and selective selling across index heavyweights indicate cautious positioning as investors navigate year-end dynamics. While both benchmark indices successfully broke their three-week decline, the underlying market breadth suggests that investors remain selective in their approach, focusing on sector-specific opportunities rather than broad-based buying.

Indian equity markets experienced a subdued trading session on Wednesday, with the Nifty closing marginally lower as profit-booking emerged across select sectors. Market analysts expect Indian equities to continue trading within a narrow range this week, citing lack of major triggers and reduced global trading activity due to holidays across several international markets.

Technical Outlook and Market Sentiment

From a technical perspective, the support base for Nifty has shifted to the 26,000 level, which coincides with the 21-day moving average (21-DMA). Market technicians indicate that upside potential remains open toward the 26,300 level, suggesting a consolidation phase for the benchmark index.

The market's risk appetite remained stable as reflected in the volatility index performance:

The continued decline in India VIX to around 9.40 levels provides reassurance to the prevailing bullish sentiment among market participants.

Institutional Investment Flows

Institutional trading activity showed contrasting patterns between foreign and domestic investors on Wednesday:

Domestic institutional investors provided crucial support to the market, offsetting foreign selling pressure with their net buying activity.

Currency and F&O Segment Updates

The Indian rupee faced pressure during the trading session, paring initial gains to settle 8 paise lower at 89.71 against the US dollar. The currency weakness was attributed to persistent capital withdrawals from foreign investors and heightened greenback demand from bullion importers.

In the futures and options segment, Sammaan Capital Securities entered the ban period, having crossed 95% of the market-wide position limit. Securities in the ban period face restrictions on fresh positions in the F&O segment until their open interest levels decline.

Market Outlook

The current market environment suggests a phase of consolidation, with traders and investors adopting a cautious approach amid limited catalysts. The combination of low volatility levels and technical support around key moving averages indicates that markets may continue to trade within established ranges in the near term, with participants closely monitoring global cues and institutional flow patterns for directional clarity.