Sensex, Nifty Prediction For July 21 To July 25: What Will Impact The Indian Stock Market Next Week?

The Indian stock market recorded its third weekly correction this week, with the Sensex down by nearly 1% and the Nifty correcting below the 25,000 pivotal level. Tepid earnings of IT and financial companies played a key role in dragging the market, while traders are monitoring the development related to US-India trade tariff talks. In the next week's session, earnings of specific stocks will be in focus.

Stocks like Reliance, Infosys, ICICI Bank, Yes Bank, HDFC Bank, Dr Reddy's Laboratories, Bajaj Finance, Nestle and Cipla will be among the major stocks to be in focus during the trading week from July 21st to July 25th, due to their Q1FY26 earnings.

On the external front, global trends, US-India trade talks, and foreign investors' flow will also be among key factors to drive sentiment.

Sensex, Nifty:

On July 18, Sensex closed at 81,757.73, down by 501.51 points or 0.61%. While Nifty broke the 25,000 mark to close at 24,968.40, lower by 143.05 points or 0.57%.

Overall, from July 14-18, the Sensex dropped by 605.35 points or 0.73%, and the Nifty plunged by 103.30 points or 0.41%.

This week, the key market drivers, as per Ajit Mishra - SVP, Research, Religare Broking, while easing CPI and WPI inflation provided temporary relief and reinforced expectations that the Reserve Bank of India would maintain its accommodative stance in the near term, macroeconomic concerns resurfaced. These were driven by a marginal decline in net direct tax collections and flat export performance in June. The first-quarter earnings season also failed to inspire confidence, with investors awaiting major corporate results for clearer direction.

"Domestic equity markets continued their protracted correction for the 3rd consecutive week and ended below the psychological level of 25k, weighed down by the broadly tepid start of Q1FY26 earnings, particularly from the IT and financial sectors," Vinod Nair, Head of Research, Geojit Investments Limited, said.

Explaining in detail, Nair added, the IT sector remained under strain due to muted performance and cautious outlooks amid global demand uncertainty, while financials are also expected to report subdued results due to expected NIM contraction and asset quality concerns. In contrast, FMCG stocks outperformed, supported by encouraging growth guidance that points to a possible revival in urban consumption trends. Improved earnings momentum supported by macroeconomic tailwinds can shift investor preferences towards consumption stocks.

FIIs/DIIs Data:

Foreign institutional investors (FIIs) inflow in the Indian market was a mixed trend this week. FIIs were net buyers on July 15 and July 18 with an inflow of Rs 120.47 crore and Rs 374.74 crore, respectively. But they were net sellers on July 14, July 16 and July 17 with outflow of Rs 1,614.32 crore, Rs 1,858.15 crore and Rs 3,694.31 crore respectively. The quantum of selling was sharper in Indian stocks from FIIs.

Meanwhile, domestic institutional investors (DIIs) continued to make strong purchases in Indian stocks, curbing selloffs of FIIs tremendously. DIIs' inflow stood at Rs 1,787.68 crore on July 14, followed by an inflow of Rs 1,555.03 crore on July 15. While inflows stood at Rs 1,223.55 crore on July 16, at Rs 2,820.77 crore on July 17, and at Rs 2,103.51 crore on July 18.

Stock Market Outlook Next Week:

Key events to watch out:

As per a Religare analyst, all eyes will remain on the ongoing earnings season, with a series of major results lined up. Investors will first react to the results of three heavyweights-Reliance, HDFC Bank, and ICICI Bank-during early trades on Monday. In the sessions that follow, several prominent companies, including Infosys, Dr. Reddy's Laboratories, Bajaj Finance, Nestle India, and Cipla, are scheduled to announce their quarterly results.

On the macroeconomic front, key data points such as India's Infrastructure Output and HSBC Flash PMI numbers for Manufacturing, Services, and Composite will be keenly tracked.

Globally, Mishra highlighted, market participants will monitor trade deal updates, which could influence FII flows and currency movements. At the same time, uncertainty persists as global markets recalibrate expectations for Federal Reserve rate cuts, amid sticky inflation and trade-related tensions.

Also, Nair said, on the global front, markets are closely monitoring the outcome of the proposed US-India mini trade agreement. A favourable resolution could strengthen the outlook for export-oriented sectors and enhance India's relative attractiveness among emerging markets. Meanwhile, the continued moderation in inflation has bolstered expectations of an additional rate cut, which, if materialised, would be supportive of market sentiment. As the earnings season progresses, quarterly updates from index heavyweights will be closely monitored. Strong earnings growth is vital to justify India's premium valuations.

Technical Outlook:

Nifty ended the week below the key psychological mark of 25,000, indicating sustained caution. The index remains vulnerable to further downside if it breaks below the immediate support zone of 24,900. A breakdown could drag the index toward the 24,450-24,700 zone in the coming sessions, as per Mishra.

On the upside, the 20-day EMA-currently acting as a short-term hurdle-may restrict recovery around the 25,250 mark. A decisive move above this level is essential for any bullish reversal. Until then, the broader trend is expected to remain under pressure.

For banking stocks, Mishra said, the banking index also came under pressure and slipped below its 20-day EMA support zone. Going forward, 55,500 will act as a crucial support area; a breach below this could intensify selling pressure. In case of a rebound, the index may face initial resistance around 56,800, with major supply zones near 57,400-58,200.

What Should Investors Do?

"We expect the index to remain in a consolidation phase with a negative bias in the near term, driven by a weak start to the earnings season and prevailing global uncertainties. Traders are advised to stay selective and focus on stocks showing strong earnings performance and relative strength," said Mishra.

Furthermore, the analyst said, among key sectors, metal, pharma, and realty appear relatively stronger, while auto and energy may consolidate and present selective opportunities.

While broader indices continue to display relative strength, the analyst added, a cautious approach is recommended when initiating fresh trades, especially with several key earnings reports and macroeconomic triggers scheduled for the upcoming week.