Market Summary

Markets staged a strong rebound during the week, supported by broad-based buying, easing geopolitical concerns, and encouraging developments on the trade front. Investor sentiment improved after the U.S.–Iran agreement to reopen the Strait of Hormuz triggered a sharp decline in crude oil prices. Optimism was further reinforced by the formalisation of the India–UK Free Trade Agreement, strengthening India’s medium-term export outlook and global trade integration. Despite concerns over delayed monsoon progress, rising wholesale inflation, and a widening trade deficit, markets remained largely resilient.

Consequently, the Nifty advanced 1.65% to settle at 24,013.10, while the Sensex gained 1.68% to close at 76,802.90. Broader markets outperformed, with mid-cap and small-cap indices rising between 3% and 3.5%, reflecting improving risk appetite.

Key Market Drivers

The easing of geopolitical tensions emerged as the most significant global development during the week. The signing of the U.S.–Iran Memorandum of Understanding reduced concerns over a prolonged conflict in West Asia and ensured the reopening of the Strait of Hormuz. Brent crude consequently declined sharply to below $77 per barrel, alleviating concerns around imported inflation, India’s current account deficit, and corporate margin pressures.

Trade-related developments also supported sentiment. India and the United Kingdom confirmed that their Free Trade Agreement will come into effect from 15 July 2026. The agreement is expected to enhance market access for Indian exporters across sectors such as textiles, engineering goods, and gems and jewellery, while also providing greater clarity around UK steel safeguard measures.

Domestic macro indicators remained supportive despite emerging inflationary pressures. Wholesale inflation accelerated to 9.68% in May, driven by higher fuel, power, and manufactured product prices, while food inflation rose to 4.49%. However, softer crude prices offer hope that inflationary pressures may ease in the coming months.

Trade data remained robust, with merchandise exports rising 18% year-on-year to $45.2 billion, led by engineering goods, petroleum products, and electronics. However, higher imports widened the trade deficit. Meanwhile, delayed monsoon progress and the U.S. Federal Reserve’s hawkish commentary remained key monitorables.

Sectoral Snapshot

Sectoral participation remained broadly positive, reflecting improving investor sentiment and rotational buying. Realty, energy, and financials emerged as the top gainers, closely followed by FMCG and banking stocks. In contrast, IT remained under pressure following a cautious update from Accenture, making it the only major sector to end the week in negative territory.

Broader market segments led the rally, with mid-cap and small-cap stocks significantly outperforming the benchmarks. Cyclical sectors benefited from expectations of easing geopolitical tensions and softer crude prices, while strong trade data supported export-oriented businesses.

Key Events to Watch

The coming week is expected to be driven by domestic macroeconomic releases and evolving global developments.

Markets will closely monitor further progress in U.S.–Iran discussions, as sustained moderation in crude oil prices could significantly improve India’s inflation outlook and external balances. Currency movements will also remain in focus.

On the domestic front, investors will track Infrastructure Output data, flash HSBC Manufacturing, Services and Composite PMI readings, along with the latest foreign exchange reserves data for fresh cues on economic momentum.

Technical Outlook

Nifty

The Nifty is expected to witness a gradual recovery, supported by improving sentiment, although mixed trends among heavyweight stocks and the presence of major moving averages could limit the pace of gains.

The positive bias is likely to remain intact as long as the index sustains above 23,700, followed by stronger support at 23,500. On the upside, immediate resistance is placed around 24,300. A decisive move above this level could pave the way towards 24,450–24,600.

Bank Nifty

Bank Nifty continued to exhibit relative strength and remains well-positioned to extend its outperformance. The index has reclaimed all major moving averages and surpassed its previous swing high near 57,450.

A sustained move above 58,000 could trigger further gains towards 58,800 and eventually the 60,000 mark. On the downside, the 55,800–56,900 zone is expected to provide a strong support base during any consolidation.

Market Breadth

Market breadth improved meaningfully during the week, with broader indices outperforming the benchmarks.

The broad-based nature of the rally suggests that investor confidence is gradually expanding beyond large-cap names. Selective risk appetite appears to be returning, supported by resilient domestic fundamentals and easing concerns around energy prices.

Notably, the Nifty Smallcap Index is approaching a potential breakout around 18,800 level after nearly two years of consolidation, which could set the stage for further outperformance and a retest of record highs.

Strategy Ahead

While the underlying market tone has improved, global developments and key domestic data releases warrant a balanced and selective approach.

With participation broadening across sectors, investors should focus on stock selection based on relative strength and earnings visibility rather than chasing laggards. The defence theme is also witnessing renewed interest; however, given the divergent trends within the space, a selective approach or exposure through ETFs may be prudent.

Broader markets are displaying leadership, but disciplined risk management remains essential. Investors and traders should avoid excessive leverage and remain mindful of lingering risks related to inflation, monsoon progression, and an evolving global backdrop.

Ajit Mishra – SVP, Research, Religare Broking Ltd.