Market Summary

Markets ended the holiday-shortened week with modest gains, advancing in three of the four trading sessions. Sentiment remained constructive, supported by easing crude oil prices, improving geopolitical developments in West Asia, and selective buying by foreign institutional investors (FIIs).

As a result, the Nifty reclaimed and sustained above the psychologically important 24,000 mark, highlighting the market’s resilience despite global volatility. For the week, the Sensex gained 0.39% to close at 77,100.47, while the Nifty advanced 0.18% to settle at 24,056. Broader markets, however, witnessed mild profit booking, with the midcap index declining around 1.15%, while the smallcap index ended largely unchanged.

Key Market Drivers

The sharp decline in crude oil prices remained the primary positive trigger for domestic equities. As tanker movement through the Strait of Hormuz normalised and geopolitical tensions in West Asia eased, Brent crude retreated toward pre-conflict levels. This helped alleviate concerns over imported inflation, India’s current account deficit, and pressure on corporate margins.

Optimism surrounding a potential India–US trade agreement also supported investor sentiment, while the return of selective FII buying after intermittent outflows improved market confidence.

Domestic macroeconomic indicators presented a mixed picture. Growth in the Index of Eight Core Industries slowed sharply to 0.5% in May, marking its second-lowest reading in 21 months, with five of the eight core sectors contracting. Electricity, cement, and steel remained the key contributors to growth, indicating that industrial momentum has moderated.

Business activity also softened during June. The HSBC Flash Manufacturing PMI eased to 54.5 from 55.0, the Services PMI declined to 57.3 from 59.8, and the Composite PMI moderated to 57.4 from 59.3. While all three readings remained comfortably above the 50-mark, they pointed to a slower pace of expansion across the economy.

India’s foreign exchange reserves declined by $9.99 billion to $671.63 billion during the week ended 12 June, primarily due to a sharp fall in gold reserves, although foreign currency assets continued to register modest growth.

Globally, markets remained volatile as investors balanced easing geopolitical concerns against expectations of a higher-for-longer interest rate environment in the United States. Initial weakness, triggered by technology-led selling and Fed-related uncertainty, gave way to improved sentiment following strong earnings and upbeat guidance from leading semiconductor companies, reviving optimism around the AI theme.

Sectoral Snapshot

Sectoral performance remained mixed, reflecting rotational and selective participation. Pharma, realty, and auto emerged as the top-performing sectors, while banking and financial stocks continued to provide stability to the benchmark indices.

On the other hand, metal and energy stocks witnessed profit booking, while broader markets also remained under pressure. The underperformance of midcap and smallcap stocks suggests that investors continue to prefer quality large-cap names amid an uncertain global backdrop.

Key Events to Watch

The upcoming week will be driven by a series of important domestic macroeconomic releases alongside global developments.

Market participants will closely monitor Industrial Production (IIP) data, government fiscal deficit numbers, the final HSBC Manufacturing, Services and Composite PMI readings, and the latest foreign exchange reserves data for fresh insights into the health of the domestic economy.

Globally, the trajectory of crude oil prices, geopolitical developments in West Asia, and trends in FII flows will remain key drivers of market sentiment. Progress on a potential India–US trade agreement will also be closely watched.

Technical Outlook

Nifty

The Nifty continues to trade within a defined range, taking support near the 23,800 zone while facing resistance around its 100-day and 200-day exponential moving averages. A sustained move above these key averages will be essential for extending the ongoing recovery, with the next upside target placed in the 24,450–24,600 zone. On the downside, 23,500 level would offer major support in case of a dip below 20 DEMA mark.

Bank Nifty

Bank Nifty continues to exhibit relative strength and remains one of the market leaders. The index has sustained above all its major moving averages, indicating improving momentum and strengthening technical structure.

A decisive move above the 59,000 mark could trigger the next leg of the rally towards 60,000, followed by a potential retest of its record high near 61,764. On the downside, the 56,200–57,000 zone is expected to provide a strong support base during any corrective phase.

Market Breadth

Market breadth remained relatively subdued despite gains in the benchmark indices, as both midcap and smallcap stocks witnessed mild profit booking.

The divergence suggests that institutional money continues to favour large-cap stocks amid global uncertainty, while participants remain selective within the broader market. Nevertheless, the broader indices’ ability to hold above key technical support levels reflects healthy underlying resilience.

Strategy Ahead

The overall market tone has improved following the sharp correction in crude oil prices and the return of selective FII buying. However, slowing domestic macroeconomic indicators and lingering uncertainty surrounding global monetary policy warrant a disciplined and stock-specific investment approach.

Participants should continue to focus on fundamentally strong companies within healthy balance sheets, robust earnings visibility, and improving relative strength. Large-cap financials, domestic cyclicals, and sectors that stand to benefit from lower energy costs remain well placed.

While the broader trend remains constructive, traders should avoid excessive leverage and maintain disciplined risk management. Sustained FII participation, continued moderation in crude oil prices, and stability in global markets will be critical for determining the strength and durability of the next leg of the market rally.

Ajit Mishra – SVP, Research, Religare Broking Ltd.