D-Street set for cautious rebound as GIFT Nifty signals gains amid global headwinds

Indian stock markets hit their lowest point in a year on Thursday as a combination of rising US bond yields and surging crude oil prices overwhelmed investor confidence. The Nifty index broke through a long-term support line that had held for two years and closed below the 200-week moving average at 22,379—a technical threshold that analysts watch closely as a signal of deeper trouble ahead. Crude oil climbed above $104 a barrel, stoking fears of persistent inflation and prompting expectations that the Reserve Bank of India would raise interest rates further, a prospect that sent shivers through a market already nervous about the impact of higher borrowing costs on corporate earnings and economic growth.

The selling was relentless. Foreign portfolio investors dumped Rs 12,943 crore worth of Indian equities on Thursday, a massive outflow that reflected global risk aversion rippling through emerging markets. Domestic investors stepped in to buy Rs 10,703 crore in shares, providing some cushion, but their purchases were not enough to offset the foreign exodus. The rupee weakened by 13 paise to close at 96.88 against the US dollar, another sign of the broader retreat from riskier assets as geopolitical tensions escalated overseas.

Technical analysts surveyed the wreckage and saw little reason for optimism in the immediate term. The Relative Strength Index, a momentum indicator, had fallen into oversold territory and flashed a bearish crossover—the kind of signal that typically precedes further declines. Support now sits at 22,180, and if the index breaks below that level, analysts warned that losses could extend toward 22,000. Any bounce higher would face stiff resistance between 22,400 and 22,600, meaning any relief rally would be capped and potentially short-lived. The India VIX, which measures market fear, jumped 10 percent to 15.28, reflecting the anxiety coursing through trading floors.

Global markets offered little comfort. US stocks dipped on Thursday as crude prices spiked on Middle East tensions and a cut in American oil output. The Nasdaq, heavy with technology stocks, suffered the steepest losses—a particularly sharp reversal given that the index had hit a record closing high just two days earlier. Semiconductor stocks slumped as concerns about artificial intelligence spending and OpenAI's revenue prospects weighed on the sector. Across Asia on Friday morning, the picture remained mixed: Japanese shares fell while Australian and European futures edged higher, but the overall mood was cautious at best.

Yet there was a sliver of hope in the pre-market signals. GIFT Nifty, the offshore futures contract that trades before the domestic market opens, was up 101.5 points, or 0.46 percent, at 22,356.5 as of Friday morning. This suggested that Indian investors might be willing to dip their toes back into equities after Thursday's bloodbath, though the gains were modest and the technical backdrop remained deeply pessimistic. Gold prices inched higher as investors sought safety and reassessed the path of Federal Reserve interest rates. Three stocks—Bandhan Bank, Ambuja Cement, and LIC—were placed under derivatives trading restrictions after their positions hit 95 percent of market-wide limits, a sign of concentrated bets in volatile territory.

Analysts cautioned that the current mood would likely persist for several more trading sessions. The breakdown below the long-term trendline was not a minor technical slip but a significant capitulation that suggested the market had entered a new, more fragile phase. Any recovery would need to clear substantial resistance, and the path of least resistance still pointed downward. For investors, the message was clear: caution remained the operative word, and any optimism about a quick rebound was premature.