Sensex, Nifty Weekly Forecast, August 4 to 8: Cautiously Bearish Amid RBI Policy, Q1 Earnings & Global Turmoil

After enduring five straight weeks of losses, Indian equity markets enter the new week from August 4 to 8 with cautious optimism. The Nifty 50 and Sensex closed last week lower by 1.1%, marking their longest weekly losing streak since 2023. Investor attention now shifts to key domestic events such as the Reserve Bank of India's monetary policy meeting, while also grappling with external pressures like U.S. tariffs, a strong dollar, foreign fund outflows and weak Q1 earnings.

Stock Market Weekly Outlook: Last Week's Performance Recap

On Friday, August 2, the Nifty 50 closed at 24,565.35, down 0.82%, while the Sensex ended at 80,599.91, down 0.72%. The indices were dragged lower by global trade worries, foreign institutional investor (FII) selling, and muted corporate earnings. Sectors such as IT, automobiles, FMCG, and realty came under selling pressure, while energy and CPSE stocks offered some support.

FPIs turned net sellers for 10 straight sessions, pulling out more than ₹27,000 crore in equities. The rupee weakened further as global risk aversion intensified. Meanwhile, domestic institutional investors (DIIs) continued to buy, offering some cushion against volatility.

Key Events to Watch This Week

1. RBI Monetary Policy Decision (August 8)

The most awaited domestic trigger is the RBI's bi-monthly policy review, with speculation of a 25 basis point rate cut. The Monetary Policy Committee (MPC) will meet between August 4 and 6, with the decision announced on August 8.

A dovish stance could trigger a rally in rate-sensitive sectors like banks, autos, and real estate. Analysts at Religare Broking and SBI expect that a pre-festive rate cut could boost credit demand and ease liquidity stress in the system.

2. Global Factors: U.S. Tariffs & Dollar Strength

Investor sentiment remains fragile following U.S. President Donald Trump's announcement of 25% tariffs on Indian goods. The dollar index rose 2.5% last week, its strongest weekly gain in nearly three years, exacerbating foreign outflows and pushing up borrowing costs for Indian companies with external debt.

India's decision to continue importing Russian oil despite U.S. pressure adds to geopolitical uncertainty and could impact trade talks.

3. Q1 Earnings Season

The Q1 earnings season has been underwhelming so far. The Nifty IT index has fallen nearly 10% in the past month, and Nifty Bank has been flat. With over 500 companies reporting results this week-including SBI, Tata Motors, LIC, Bharti Airtel, Bajaj Auto, Titan, and Divis Labs-investors will look for signs of earnings revival or further margin pressure.

Disappointment in this batch of earnings could trigger further downside, while positive surprises may aid short-term recovery.

"The Q1 earnings season disappointed, leading to EPS downgrades for FY26-negative surprises punished more than positive ones rewarded. On a brighter note, Indian bonds have outperformed with the 10-Yr G-sec yield vis-à-vis 10-Yr US Treasury Yield gap narrowing to a 20-year low. Attention now shifts to the upcoming MPC meeting, hoping for supportive policy action," said Jyoti Prakash, Managing Partner. Equity and PMS at AlphaaMoney.

Technical Outlook: Nifty and Sensex Levels to Watch

According to analysts, Nifty is likely to face strong resistance around the 25,000 mark in the near term. Immediate support lies at 24,800, with key long-term support at 24,100. A break below 24,100 could disrupt the current rally structure and trigger deeper corrections.

For the Sensex, the index encountered resistance at 82,000 last week. Immediate support is seen at 81,500, with stronger support at 80,000. A breach of these levels could signal further bearishness.

However, the India VIX fell sharply last week to 11.4, the lowest since the general elections, indicating reduced volatility expectations. Analysts suggest the market remains in a "buy-on-dips" mode, though conviction remains low due to global and domestic uncertainties.

Sectoral Trends

• Gainers: Nifty Energy (+2.53%), Nifty CPSE (+2.32%), Healthcare (+0.98%)
• Losers: Realty (-3.76%), IT (-3.04%), Auto (-2.04%), FMCG (-1.57%)

"Global headwinds intensified this week for Indian markets, with the U.S. imposing a 25% tariff and additional penalties on Russian oil imports, amplifying uncertainty. Gold prices were stable near $3,350/oz, while equity valuations remain elevated. Large caps dropped 1.2%, dragged by Adani Enterprise, Kotak, and Wipro, though Varun Beverages and Bosch offered some resilience. Mid and small caps fared worse, declining 1.9% and 3.0% respectively, led by losses in MRPL, Indus Tower, and several NBFCs.
Foreign investors have turned net sellers for ten straight days, driving the rupee to its weakest month since 2022, even as domestic investors provide steady support," said the expert.

The divergence in sectoral performance signals a lack of broad-based buying. High-valuation sectors and exporters may continue to remain under pressure, while defensive plays like energy and healthcare could attract interest.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.