CHENNAI: Indian equity markets went through a volatile but ultimately stabilising phase during the week ended December 12, as investors navigated a mix of global monetary cues, foreign fund flows and domestic macro concerns. The benchmark indices began the week on a cautious note after hovering near record highs, with sentiment turning guarded amid sustained profit-taking and uncertainty ahead of key global central bank decisions.
In the early part of the week, according to daily review repots released by various brokerages, markets struggled to find direction as selling pressure emerged in heavyweight stocks, particularly in information technology and select financial names. Foreign portfolio investors remained net sellers, which added to the pressure on frontline indices. A weakening rupee and lingering concerns over global growth prospects further dampened risk appetite, prompting investors to lock in gains accumulated during the earlier rally. As a result, both the Sensex and the Nifty drifted lower over successive sessions, slipping below important short-term technical levels.
Midweek trade was marked by heightened volatility. The Nifty briefly moved below the psychologically important 26,000 mark as selling intensified in index heavyweights, while broader markets displayed mixed trends.
Brokerage SBI Securities wrote on Saturday that the Nifty Futures broke its three-day losing streak on Thursday, closing 0.56% higher. The first hour witnessed sharp selling pressure, but aggressive put writing at lower strikes provided a firm cushion and triggered minor short covering. As late short sellers were trapped, the index futures extended its recovery and closed above the 26000 mark. A decline in implied volatility signalled a controlled rebound, rather than panic.
Meanwhile, Bank Nifty Futures remained highly volatile, recording an intraday swing of nearly 640 points and forming a highwave candle on the daily chart reflecting short-term uncertainty and two-sided participation. The price action suggested buyers were active at lower levels, while call writers defended higher zones. Despite the volatility, the index ended 0.42% higher, closing above the 59400 mark. The India VIX dipped 4.67%, indicating the absence of near-term panic and a stabilizing volatility environment, stated senior security analysts at the brokerage.
Defensive pockets offered limited support, but the overall tone remained cautious as participants stayed on the sidelines ahead of the US Federal Reserve’s policy outcome. Mid-cap and small-cap stocks showed relative resilience compared with the benchmarks, indicating selective buying interest despite broader weakness.
Sentiment improved sharply towards the latter half of the week following the US Federal Reserve’s decision to cut interest rates, which revived global risk appetite. Indian markets responded positively, staging a strong rebound after three sessions of decline. Buying interest was broad-based, with cyclical sectors such as metals and capital goods leading the recovery, supported by expectations of improved global demand and a softer interest rate environment. Banking and auto stocks also contributed to the upmove, helping the benchmarks recoup a significant part of the week’s losses.
The rally extended into the final trading session of the week, allowing the Sensex and the Nifty to close firmly in positive territory. Domestic institutional investors played a supportive role, absorbing selling pressure from overseas investors and lending stability to the market. Improved market breadth towards the end of the week reflected renewed confidence among investors, particularly in rate-sensitive and economically linked sectors.
Global Trend
Analysing the overall trend in the global markets, edutech and financial planning platform Invest4Edu wrote; US stocks closed mixed on Thursday, with investors moving into economically sensitive sectors following the Fed's third rate cut of the year. The Dow rose 1.34%, the S&P 500 gained 0.21%, and the Nasdaq fell 0.26%, showing a shift away from high-growth technology.
Broadcom fell nearly 5% in extended trading despite forecasting higher AI chip sales, while Lululemon rose 10% after announcing the departure of its CEO. The Dow and S&P 500 were boosted by strong gains from Visa, Nike, and UnitedHealth, while the Nasdaq lagged as Alphabet and Nvidia fell, raising concerns that market leadership may remain narrow despite policy support.
While, European markets closed higher on Thursday as investors took in the Fed's latest rate cut and the Swiss National Bank's decision to keep interest rates at 0%. The Stoxx 600 gained 0.55%, the DAX rose 0.68%, the FTSE 100 gained 0.49%, and the CAC 40 remained flat. Despite pressure from US tariffs, sentiment was boosted by resilient global growth, though tech stocks lagged after Oracle's disappointing results dragged SAP, ASMI, and ASML down. Investors also considered the Fed's signal of a slower pace of future cuts, with Chair Powell citing Trump-era tariffs as key inflation drivers. The focus now shifts to the December 18 meetings of the ECB and the Bank of England.
Asian markets traded mostly higher on Friday, tracking Wall Street's gains following the Fed's recent rate cut. The US central bank decreased its key overnight rate by 25 basis points to 3.5%-3.75%, showing a cautious approach to further easing. At 7:20 a.m. IST, the Nikkei 225 was up 0.99%, the S&P/ASX 200 was up 1.03%, the Hang Seng was up 0.79%, the Kospi was up 1.24%, and the Shanghai Composite was down 0.57 %, analysts at the platform wrote on Saturday.
Overall, the week was characterised by an early correction driven by profit-booking and foreign outflows, followed by a decisive recovery triggered by supportive global monetary signals. While benchmark indices managed to end the week higher, the underlying tone remained cautious, with investors closely tracking currency movements, foreign fund flows and evolving global economic cues. The recovery in the latter half of the week highlighted the market’s resilience, but the choppy movement underscored the fragile balance between optimism over easing global financial conditions and concerns around external headwinds.