Weekly Market Report: Indian Markets Consolidate After Record Highs ( 2nd week - December)

Market Overview: How Domestic Markets Performed
Indian equity markets witnessed a volatile but broadly range-bound week, as early gains gave way to profit booking, followed by a recovery towards the end of the week.
At the start of the week, benchmark indices extended their upward momentum and touched fresh record highs. The Nifty 50 moved close to 26,325, while the BSE Sensex surged to around 86,159, supported by buying in heavyweight stocks and optimism around domestic growth prospects.
Mid-week, however, markets saw cooling momentum. Investors booked profits at higher levels amid global uncertainty, rising bond yields, and pressure on the Indian rupee. As a result, indices traded with a negative bias during some sessions, with the Sensex slipping modestly and the Nifty largely consolidating.
Towards the end of the week, sentiment improved. On Friday, markets staged a strong rebound, with the Sensex rising about 447 points and the Nifty closing above 26,150, led by gains in banking, auto, and other rate-sensitive sectors.

Takeaway:
 The week reflected a classic consolidation phase after a sharp rally—record highs early on, profit booking mid-week, and renewed buying interest by the end, highlighting cautious yet resilient investor sentiment.

Global Market & Commodity Cues
Global markets remained uneasy throughout the week, impacting domestic sentiment.
U.S. equities declined after a multi-day rally, as investors turned cautious amid risk-off sentiment and selling in high-risk assets. Global bond yields moved higher, especially after hawkish commentary from the Bank of Japan, prompting a shift away from equities worldwide.
On the commodities front, crude oil prices softened mid-week, supported by easing geopolitical concerns and supply-side factors. Lower oil prices provided some relief on inflation expectations for emerging markets like India.
However, uncertainty persisted due to new sanctions and policy actions related to Russian oil exports, keeping energy markets volatile.

Takeaway:
 Rising global bond yields, cautious risk sentiment, and fluctuating crude prices created an uncertain backdrop for equity markets.

Currency & Forex: Rupee–Dollar Movement
The Indian rupee came under significant pressure during the week, breaching the ₹90 per US Dollar level — a key psychological milestone.
The weakness was driven by:

• Continued foreign institutional investor (FII) outflows
• Higher demand for dollars from importers
• Trade-related uncertainties and global risk aversion

Despite RBI intervention, the rupee remained volatile, indicating persistent external pressure. Toward the end of the week, the currency recovered slightly and traded closer to ₹89.80, supported by improved market sentiment.

Implications:
 A weaker rupee increases import costs (especially oil and raw materials), adding inflationary pressure. Export-oriented sectors benefit, while import-dependent industries face margin challenges.

Sectoral Performance Snapshot
Banking & Financials: Strong recovery towards week-end, supporting index gains

• Auto & Rate-sensitive sectors: Benefited from improved sentiment and expectations of policy support
• IT & Export-oriented sectors: Supported by rupee weakness
• Import-heavy sectors: Faced pressure due to currency depreciation

Key Risks & Opportunities
Opportunities

• Export-focused sectors such as IT, pharma, and chemicals may benefit from rupee depreciation
• Rate-sensitive sectors could continue to see interest amid improving domestic sentiment

Risks / Headwinds

• Persistent rupee weakness may fuel inflation and pressure margins
• Rising global bond yields and geopolitical risks remain key concerns
• Continued FII outflows could increase market volatility

Outlook: What to Watch Going Forward

• Foreign fund flows: Any reversal or continuation will impact both equity and currency markets
• Crude oil prices: Sharp movements could influence inflation and corporate costs
• Global cues: Bond yields, global monetary signals, and geopolitical developments
• Domestic sentiment: Sustainability of buying in rate-sensitive sectors after the recent rebound

Overall View:
 Indian markets remain fundamentally resilient but are entering a phase of consolidation. While short-term volatility may persist due to global and currency-related factors, selective opportunities continue to emerge across sectors.