What to Expect from Indian Stock Market Tomorrow?

As the Indian stock market approaches Monday, July 21, 2025, traders and investors brace for a session shaped by a blend of global cues, macroeconomic developments, earnings reactions, and technical indicators. While the benchmark Nifty and Sensex closed last week on a cautious note, the underlying sentiment remains moderately positive, supported by expectations of a further rate cut from the Reserve Bank of India (RBI). Here is a detailed analysis of what market participants should anticipate tomorrow.

Global Market Indicators Suggest a Soft Opening

The GIFT Nifty, a derivative that reflects pre-market sentiment for the Indian stock market, currently trades about 0.7% lower. This trend signals a likely negative or subdued start for Nifty 50 and Sensex on Monday. Global equity markets closed last week on a mixed note. The U.S. markets displayed volatility due to trade war rhetoric and weak retail data, while European indices ended marginally lower following disappointing industrial output figures.

If the U.S. markets rebound overnight on Sunday, the Indian market may open higher. Otherwise, the weak GIFT Nifty indication will likely shape a lower opening. Traders should monitor the Dow Jones and Nasdaq futures closely before market open.

RBI Policy, Inflation, and Liquidity Outlook

India’s consumer inflation recently fell below 3%, marking a six-year low. This trend strengthens the case for the RBI to ease interest rates again, possibly by 25 basis points in September or October. The central bank remains focused on stimulating growth, especially after signs of weakening demand in urban consumption, automobile sales, and discretionary spending.

In addition, the RBI absorbed ₹1 lakh crore from the banking system via a Variable Rate Reverse Repo (VRRR) operation last week. This move ensures better liquidity control and aligns overnight rates with the repo rate. Moreover, the RBI’s decision to transition toward a secured operative rate (SORR) instead of the current Weighted Average Call Rate (WACR) signals a structural shift in monetary operations. These efforts create a stable interest rate environment, which equity markets generally appreciate.

In summary, low inflation and proactive liquidity management by the RBI set a supportive backdrop for equities. However, the benefits of monetary easing may reflect more clearly in coming weeks rather than tomorrow’s session.

Technical Setup and Market Levels

The Nifty 50 ended last week just below the crucial 25,000 mark. It currently hovers near the support zone of 24,770 to 25,000. Sensex, too, closed the week around the 82,000 level. The recent weekly candle on Nifty displayed a bearish pattern, but volume remained low. This formation suggests a healthy consolidation rather than a trend reversal.

If Nifty sustains above 25,000 tomorrow, then upward momentum could take the index toward 25,400–25,600 levels. On the downside, if Nifty breaches 24,770, the index may slide toward 24,500 or even 24,300 in an extended correction.

Traders should also track key technical indicators like Relative Strength Index (RSI) and Moving Averages. Nifty remains above its 20-day and 50-day moving averages, which indicates continued strength in the medium-term trend.

Sector-Wise Expectations

1. Banks and Financial Services
Banking and non-banking financial stocks could attract attention due to expectations of a rate cut. Lower interest rates tend to reduce borrowing costs and improve margins for financial institutions. Stocks like HDFC Bank, L&T Finance, and Axis Bank may see increased buying interest if rate easing commentary intensifies.

2. Automobiles
Automobile stocks may also gain on interest rate optimism, though weak consumer demand continues to drag sectoral growth. Bajaj Auto and Eicher Motors could outperform on technical strength and possible support from rural-focused subsidies expected in upcoming policy announcements.

3. Realty and Infra
Real estate stocks such as Prestige Estates and DLF could benefit from lower borrowing costs and a gradual revival in urban housing demand. Infrastructure plays may also gain if government spending picks up pace ahead of the festive season.

4. FMCG and Beverages
Companies like Varun Beverages and UPL remain investor favorites. Strong distribution networks, rural resilience, and recent price adjustments could support performance in these stocks.

5. IT and Pharma
Information technology stocks may remain range-bound due to mixed signals from U.S. client spending. Pharma stocks could perform defensively if broader indices correct intraday.

Earnings Season: Mixed Bag

The Q1FY26 earnings season continues, and investors will likely react to management commentary more than headline numbers. Many companies report flat revenue growth but improved margins due to input cost control. Market reactions remain stock-specific.

Tomorrow, companies in mid-cap segments will announce their results. Traders should avoid aggressive positions in such stocks until earnings release. Stock-specific volatility will remain high.

External Influences and Geopolitical Factors

Tariff tensions between the U.S. and China continue to pressure global investor sentiment. Any new trade measures could disrupt supply chains and dent commodity demand. Crude oil prices remain volatile due to instability in the Middle East and Russia. Higher oil prices may trigger inflation concerns and hurt Indian oil marketing companies.

Investors must also monitor the bond yield movements in the U.S. A sudden spike in yields can prompt foreign investors to pull out funds from Indian equities. FII and DII activity data at the end of Monday’s session will give more insight into institutional mood.

Sentiment Among Traders and Retail Investors

Retail traders on community platforms like Reddit and Telegram show mixed sentiment. Some expect a bounce from 25,000 levels, while others remain cautious ahead of global macro triggers. Sentiment indicators, including Put-Call Ratio (PCR) and India VIX (volatility index), suggest increased hedging activity.

Options data shows maximum open interest build-up at 25,000 strike price, which reinforces its importance as a short-term support level. A sharp move beyond this level on either side may result in a directional breakout.

Catalysts That Could Move Markets Tomorrow

Trading Strategy for July 21

For Traders

• Monitor global indices and crude oil price early morning.

• Trade within the defined range of 24,770 to 25,300.

• Use tight stop-loss and avoid overnight positions unless strong breakout occurs.

For Investors

• Accumulate quality banking and infra stocks on dips.

• Stay focused on fundamentally sound companies with earnings momentum.

• Avoid overexposure in high-beta small caps unless supported by strong volume.

Risk Management

• Place stop-losses below 24,770 on Nifty-based trades.

• Initiate fresh long positions only after a clear breakout above 25,300.

Conclusion

The Indian stock market may begin the new week with a mild negative bias due to weak global cues and mixed technical signals. However, underlying support from low inflation, anticipated monetary easing, and stable institutional flows could cushion downside risk. Traders should stay cautious in the morning session and wait for directional clarity before committing large positions. Investors should continue to build positions in fundamentally strong sectors aligned with the interest rate cycle. As always, disciplined risk management and a watchful eye on global developments will remain essential for navigating tomorrow’s market.

Also Read – GENIUS Act Becomes Law: A Game-Changer