Market Summary

Markets ended the week lower, with the benchmark indices, Nifty and Sensex, declining amid concerns over geopolitical tensions and uncertainty in global trade. However, supportive domestic macroeconomic cues helped limit the extent of the decline.

Consequently, the benchmark indices, Nifty and Sensex, ended the week with losses of over 0.5% each, closing at 23,366.70 and 74,243.34, respectively. On the broader front, the midcap index declined by over 1.5%, while the smallcap index ended broadly flat, reflecting selective participation.

Key Market Drivers

The RBI’s policy outcome was the key domestic event during the week. The Monetary Policy Committee (MPC) kept the repo rate unchanged at 5.25% and maintained a neutral stance. However, it revised its FY27 CPI inflation forecast upward to 5.1% from 4.6% and lowered its real GDP growth estimate to 6.6% from 6.9%. The central bank highlighted elevated energy prices, supply-side disruptions, weaker monsoon expectations, and the risk of El Niño as key downside risks to growth.

On the macro front, India’s economy remained resilient. GDP growth for FY26 was estimated at 7.7%, while the January–March quarter growth stood at 7.8%. Industrial production rose 4.9% in April, while GST collections increased 3.2% in May to over ₹1.94 lakh crore. The HSBC Services PMI was revised higher to 59.8, indicating strong expansion in services activity. Manufacturing PMI improved to 55.0, while the Composite PMI remained firmly in expansionary territory.

Policy support was also visible on the fiscal and external front. The government announced measures to attract long-term foreign capital, including tax exemptions for FPIs on eligible government securities and expanded access to sovereign bonds and listed equities for select foreign investors. In addition, the RBI’s record dividend transfer of ₹2.87 lakh crore to the government provided further fiscal support.

Global cues remained mixed. Stronger-than-expected manufacturing activity in China offered some support, while weakness in the Eurozone and higher inflation in the region weighed on sentiment. Persistent geopolitical tensions, crude oil volatility, and elevated US bond yields further contributed to global uncertainty.

Sectoral Snapshot

Most key sectors traded under pressure during the week, with FMCG, realty, and metal among the top laggards. However, resilience in banking helped cushion the downside to some extent. Overall, selective stock-specific opportunities continued to emerge across sectors.

Key Events to Watch

The coming week will be driven by key inflation, growth, and global macroeconomic data releases. In India, investors will closely track inflation data for May, scheduled for release on 12 June, along with foreign exchange reserves data on the same day. These indicators will provide important cues on domestic price pressures and external sector stability.

Globally, developments around US–Iran negotiations and their implications for crude oil prices, currency movements, and overall risk sentiment will remain in focus.

Technical Outlook

Nifty

While the broader index trend remains weak, mixed performance among heavyweight stocks has limited the pace of decline. Against this backdrop, a cautious stance is warranted, with a sell-on-rise approach preferred until the Nifty decisively reclaims the 23,700 level. The next major resistance is placed near 24,000. On the downside, a decisive break below 23,150 could trigger the next leg of decline towards 22,800.

Bank Nifty

Bank Nifty outperformed the benchmark indices during the week, ending with a gain of ~0.47%, supported by oversold conditions and value buying at lower levels. Going forward, a decisive breakout above 55,000 could trigger a recovery towards the 56,000–56,200 zone. On the downside, the recent swing low of 52,783.45 remains a critical support level; a break below it could weaken the recovery structure and drag the index towards 51,500–52,000.

Market Breadth

Broader markets witnessed mixed participation. Midcaps saw profit booking and declined by over 1.5%, while smallcaps remained broadly stable. This indicates continued selective allocation towards stocks with strong earnings visibility, order inflows, and domestic demand drivers, even as overall index-level sentiment remains cautious.

Strategy Ahead

Given the combination of supportive domestic fundamentals and elevated global uncertainty, a selective and disciplined investment approach is warranted. Focus should remain on companies with strong earnings visibility, healthy balance sheets, and exposure to domestic demand themes.

While opportunities continue to emerge in the broader market universe, stock selection remains more important than index direction in the current environment. At the same time, volatility stemming from inflation data, crude oil movements, and global policy signals calls for prudent risk management and restrained leverage.

Ajit Mishra– SVP, Research, Religare Broking Ltd.