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Volatility to prevail amid Tariff development and RBI policy

ICICIdirect Research 01 Aug 2025 DISCLAIMER

Index extended loses over fifth consecutive week tracking tariff development, U.S. Fed Policy, FII's sell-off, depreciating rupee and lacklustre earning season. Consequently, Nifty performed in tandem with global peers and settled the volatile week at 24570, down 1%. Sectorally, Realty, Defence, Metal extended losses while FMCG relatively outperformed the benchmark. Broader market continued to inch downward over second consecutive week, down in the range of 1-2%
Key Highlight: Despite gap-down opening tracking anxiety around tariff, index managed to hold 24500 levels which has been held over past 2 and 1/2 months despite geopolitical as well as tariff worries. Amidst development of Tariff negotiations, possibility of knee-jerk reaction cannot be ruled out. In such a case breakdown below 24500 would result into extended correction wherein strong support isp laced at 24200 being 200 days EMA.    
What to expect: Tariff negotiation’s outcome would dictate the further course of action. In the process, strong support is placed at 24200. Any positive outcome would help Nifty to head towards 25300 in coming weeks.
Oversold conditions: Past five weeks corrective move (-4%) hauled weekly stochastic oscillator in oversold conditions (placed at 12), indicating impeding pullback.
Broader market: The midcap index is currently trading below its two months low, indicating pause in upward momentum. Hence, it’s important to keep stock centric approach while focusing on stocks backed by strong earnings.  


Key monitorable:

Development of Bilateral trade deal negotiations
RBI Policy
U.S. Dollar index has pulled back and likely to retest past 2 years breakdown area of 100.50. Failure to sustain above it would result into resumption of down trend
India VIX : after 11 weeks India VIX is likely to close above previous week high. Further, bounce back from cyclical low of 10 suggest rise in volatility going ahead

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