By Ajit Mishra

 

Indian equity markets staged a robust comeback during the week, buoyed by easing geopolitical tensions, a sharp correction in crude oil prices, and renewed optimism surrounding global trade. The reopening of the Strait of Hormuz following a U.S.–Iran agreement eased concerns over energy supply disruptions, while the formalisation of the India–UK Free Trade Agreement strengthened confidence in India's medium-term export prospects. Despite concerns over delayed monsoon progress, rising wholesale inflation, and a widening trade deficit, investor sentiment remained resilient, resulting in broad-based gains across sectors and market capitalisations.

Consequently, the Nifty advanced 1.65% to settle at 24,013.10, while the Sensex gained 1.68% to close at 76,802.90. The rally extended beyond frontline stocks, with mid-cap and small-cap indices rising between 3% and 3.5%, reflecting a clear improvement in risk appetite.

The easing of geopolitical tensions emerged as the most significant global development of the week. The signing of the U.S.–Iran Memorandum of Understanding reduced fears of a prolonged conflict in West Asia and ensured the reopening of the Strait of Hormuz. As a result, Brent crude prices declined sharply to below $77 per barrel, easing concerns around imported inflation, India's current account deficit, and pressure on corporate margins.

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

Domestic macroeconomic indicators remained largely supportive despite emerging inflationary pressures. Wholesale inflation accelerated to 9.68% in May, driven by higher prices of fuel, power, and manufactured products, while food inflation rose to 4.49%. However, the decline in crude prices offers hope that inflationary pressures may moderate in the months ahead.

Trade performance remained encouraging, with merchandise exports rising 18% year-on-year to $45.2 billion, led by engineering goods, petroleum products, and electronics. However, a rise in imports widened the trade deficit. Delayed monsoon progress and the U.S. Federal Reserve's hawkish commentary also remained key areas of concern for investors.

Sectoral participation remained broad-based, highlighting improving investor confidence and continued rotational buying. Realty, energy, and financial stocks emerged as the top performers, followed closely by FMCG and banking counters. Information technology remained the only major laggard after a cautious business outlook from Accenture weighed on sentiment across the sector.

Broader market segments led the rally, with mid-cap and small-cap stocks significantly outperforming benchmark indices. Cyclical sectors benefited from expectations of softer energy prices and reduced geopolitical risks, while export-oriented companies gained from strong trade data and the positive implications of the India–UK trade pact.

The coming week is likely to be influenced by a mix of domestic macroeconomic data and global developments.

Market participants 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 are also expected to remain in focus.

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

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

The positive bias is likely to remain intact as long as the index sustains above 23,700, with stronger support placed near 23,500. On the upside, immediate resistance is seen around 24,300. A decisive breakout above this level could open the door to 24,450–24,600.

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

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

Market breadth strengthened significantly during the week, with broader indices comfortably outperforming the benchmarks.

The widespread participation in the rally suggests that investor confidence is gradually expanding beyond large-cap stocks. Selective risk appetite appears to be returning, aided by resilient domestic fundamentals and easing concerns over energy prices.

Notably, the Nifty Smallcap Index is approaching a potential breakout near the 18,800 level after nearly two years of consolidation. A successful breakout could pave the way for sustained outperformance and a retest of record highs.

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

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

Although broader markets are exhibiting leadership, 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 macroeconomic environment.

 

The author is SVP, Research, Religare Broking Ltd.