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This Religare Broking analyst explains why this is a ‘buy on dips’ marketBenchmark indices broke out of a three-week range to post 4%+ gains, with broad-based participation. Religare Broking’s Ajit Mishra says rotational strength makes this a buy-on-dips market.By Ajit Mishra  May 17, 2025, 2:27:52 PM IST (Published)3 Min ReadMarkets advanced notably this week, breaking out of a three-week consolidation phase and posting gains of over 4%, buoyed by favourable cues. The benchmark indices began the week on a strong note, briefly paused mid-week, but regained momentum towards the end. Consequently, the Nifty and Sensex closed at 25,019.80 and 82,330.59, respectively.

Key Market Drivers

The market’s upward momentum was fuelled primarily by the announcement of a ceasefire between India and Pakistan over the weekend, signalling a reduction in geopolitical tensions. Investor sentiment received an added boost from encouraging developments in US-China trade negotiations, easing concerns of a prolonged global economic slowdown.

Additionally, the release of softer retail and wholesale inflation data has raised hopes of a rate cut by the Reserve Bank of India in its upcoming policy meeting. Consistent buying by Foreign Institutional Investors (FIIs) further amplified the positive undertone in equities.

Sectoral Snapshot

The rally saw broad-based participation, with all major sectors contributing to the gains. Realty, metal, and energy stocks led the charge. Thematic plays such as defence, railways, and select PSUs across sectors also attracted significant investor interest.

Broader markets outperformed the benchmarks, with midcap and smallcap indices logging strong gains in the 7%–9% range, reinforcing bullish sentiment.

Key Events to Watch

With no major global or domestic events lined up, the market’s attention will shift towards domestic earnings and high-frequency economic indicators. Updates on global trade negotiations and their spill-over effects on equity markets will also be keenly watched.

Also Read: Asian currencies near a seven-month high but things may get volatile

Market participants will continue tracking foreign capital flows, which have played a pivotal role in sustaining the rally.

On the earnings front, results from companies like ONGC, ITC, Hindalco, JSW Steel, and Power Grid could influence short-term trends.

Technical Outlook

Having broken out of a consolidation range, the Nifty is expected to sustain its upward trajectory. It now eyes 25,200–25,600 on the upside. The earlier resistance at 24,800 is likely to serve as immediate support, with stronger support around 24,400.

Within the index constituents, the banking sector has entered a consolidation phase after its recent outperformance but continues to trade above its 20-day exponential moving average (20-DEMA), suggesting potential for a renewed upmove. The Bank Nifty may head towards 56,000 and 57,500 in the near term, while 54,350 and 53,600 remain key support levels.

Strategy Ahead

We maintain a bullish outlook and recommend a ‘buy on dips’ approach. With rotational participation from key sectors, stock selection based on favourable risk-reward remains crucial.

Thematic themes like defence and railways, which have shown strength in recent weeks, could continue to offer trading opportunities. However, traders are advised to remain disciplined, define exit strategies clearly, and avoid contrarian bets without strong technical confirmation.

Ajit Mishra is the SVP of Research at Religare Broking Ltd.Continue ReadingCheck out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!TagsIndian stock marketsNifty SensexReligareShare market