Can Nifty, Sensex rally further or will bears reign in? 5 factors to decide market action next week

Sensex and Nifty extended gains for a second straight session on Friday, led by IT stocks, which rose for a fourth consecutive session, along with buying in auto, metal and PSU banking stocks. Nifty's recovery could continue as long as it holds above the crucial 22,750-22,800 support zone.

Benchmark indices Sensex and Nifty extended gains for a second consecutive session on Friday. Continued strength in IT stocks, which rose for a fourth straight session, along with buying in auto, metal and PSU banking stocks, supported the rally.

Looking ahead, the 22,800-22,750 zone remains a crucial support. As long as Nifty sustains above 22,750, the recovery is likely to extend. On the upside, 23,400-23,450 remains the immediate resistance zone, a decisive breakout above which could propel the index towards 23,650, coinciding with its 100-day EMA.

Here are 5 factors that investors need to watch out for

1.) Q2 earnings - Banking heavyweights HDFC Bank, ICICI Bank, and Axis Bank all declared their earnings on Saturday. Investors will assess loan growth, deposit mobilisation, margins, asset quality and management commentary for cues on earnings momentum, credit demand and the outlook for the financial sector.

India's largest private lender HDFC Bank on Saturday reported a net profit of Rs 19,510 crore for the second quarter of FY27, marking a 4.6% jump from Rs 18,641 crore posted in the same period last year. HDFC Bank's net interest income (interest earned less interest expended) for the quarter ended September 30, 2026, grew 9.7% to Rs 34,620 crore from Rs 31,550 crore in the corresponding quarter last year.

2.) Oil prices - Crude oil prices climbed sharply higher on Friday to clinch $110 for the first time since May as Iran intensified attacks in the Strait of Hormuz, Houthi militants launched missiles at Saudi Arabia and Ukraine pledged to resume strikes on Russian refineries, fuelling concerns over global energy supplies.

Markets remain uncertain about how the conflict will develop. JPMorgan analysts said the war's eventual trajectory was difficult to model. At the outset, the bank had expected the US administration to avoid crossing certain economic thresholds. Seven months into the conflict, many of those thresholds had been crossed, while a clear exit strategy remained elusive.

3.) IT stocks - IT stocks such as

TCS, Tech Mahindra, Infosys and Wipro had a strong week, rallying up to 17% and lifting the index by 12% over the week amid better-than-expected earnings and a sharp plunge in AI-linked stocks.

4.) FII activity - Foreign institutional investors (FIIs) remained net sellers for the ninth consecutive week, but outflows eased sharply to Rs 8,991 crore from Rs 30,294 crore in the previous week, according to Bajaj broking.

FIIs turned net buyers of Rs 1,166 crore on Friday. Domestic institutional investors (DIIs), meanwhile, remained net buyers for the ninth straight week, with inflows of Rs 7,813 crore, despite net selling of Rs 3,661 crore on Friday. Month-to-date, DII net buying of Rs 48,168 crore has almost entirely offset FII net selling of Rs 48,769 crore.

Going ahead, the moderation in FII outflows suggests that market sentiment may be stabilising, although elevated crude oil prices continue to pose a risk to the recovery. Investors will track Brent crude prices and developments in US-Iran relations, while domestic attention will remain on Q2FY27 earnings, Pabitro Mukherjee of Bajaj Broking said.

5.) Rupee up for 5th session - The Indian rupee rose 2% this week to record its strongest weekly gain in seven months, supported by policy measures aimed at stabilising the currency. However, analysts cautioned that a sustained recovery would depend on easing the underlying pressures on the rupee.

The currency closed at Rs 94.96 per US dollar, up 0.1% on the day, recovering after last week's slide brought it close to its record low of Rs 96.96 per dollar.