By AJIT MISHRA
Indian equity markets staged a resilient recovery during the
holiday-shortened week, posting modest gains in three of the four trading
sessions as easing crude oil prices, improving geopolitical conditions in West
Asia and selective buying by foreign institutional investors (FIIs) boosted
investor sentiment.
The benchmark Nifty reclaimed and comfortably held above the
psychologically significant 24,000 mark, underlining the market's resilience
despite lingering global uncertainties. For the week, the Sensex rose 0.39 per
cent to close at 77,100.47, while the Nifty gained 0.18 per cent to settle at
24,056. Broader markets, however, witnessed mild profit booking, with the
midcap index declining about 1.15 per cent, while the smallcap index ended the
week largely flat.
The sharp correction in crude oil prices emerged as the
biggest positive trigger for domestic equities. With tanker traffic through the
Strait of Hormuz normalising and geopolitical tensions in West Asia easing,
Brent crude retreated towards pre-conflict levels. Lower oil prices eased
concerns over imported inflation, India's current account deficit and pressure
on corporate earnings, thereby improving overall market sentiment.
Optimism over a potential India-US trade agreement further
supported investor confidence, while the return of selective FII inflows after
intermittent selling reinforced the positive mood.
On the domestic macroeconomic front, however, data remained
mixed. Growth in the Index of Eight Core Industries slowed sharply to 0.5 per
cent in May, marking its second-lowest reading in 21 months, with five of the
eight sectors registering contraction. Electricity, cement and steel remained
the principal contributors, indicating that industrial activity 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, while the Composite PMI moderated to 57.4 from 59.3. Although all
three indices remained comfortably above the 50-mark, they pointed to a slower
pace of economic expansion.
India's foreign exchange reserves fell by $9.99 billion to
$671.63 billion during the week ended June 20, largely due to a decline in gold
reserves, even as foreign currency assets continued to post modest gains.
Globally, markets remained volatile as investors balanced
easing geopolitical concerns with expectations that US interest rates could
remain elevated for longer. Initial weakness driven by technology-led selling
and Federal Reserve uncertainty gave way to renewed optimism following robust
corporate earnings and upbeat guidance from leading semiconductor companies,
reviving enthusiasm around artificial intelligence-driven growth.
Sectorally, market performance remained mixed, reflecting
rotational buying. Pharma, realty and automobile stocks emerged as the top
gainers, while banking and financial shares continued to provide stability to
the benchmark indices. In contrast, metals and energy stocks witnessed profit
booking, and the underperformance of mid- and small-cap segments indicated that
investors continued to favour quality large-cap stocks amid an uncertain global
backdrop.
Outlook
for the Week Ahead
Investors will closely track a series of important domestic
economic releases, including Industrial Production (IIP) data, government
fiscal deficit figures, the final HSBC Manufacturing, Services and Composite
PMI readings, and the latest foreign exchange reserves data for fresh cues on
the economy.
Globally, movements in crude oil prices, geopolitical
developments in West Asia, trends in FII flows and progress on a potential
India-US trade agreement will remain key drivers of market direction.
From a technical perspective, the Nifty continues to trade
within a well-defined range, finding support near the 23,800 level while facing
resistance around its 100-day and 200-day exponential moving averages. A
decisive breakout above these key averages could pave the way for a rally towards
the 24,450-24,600 zone. On the downside, the 23,500 level is expected to
provide strong support in case the index slips below its 20-day exponential
moving average.
Bank Nifty continues to display relative strength and remains
one of the market's leading indices. Sustaining above all major moving averages
reflects improving momentum and a strengthening technical structure. A decisive
move beyond 59,000 could trigger the next leg of the rally towards 60,000,
followed by a possible retest of its record high near 61,764. The 56,200-57,000
zone is expected to offer strong support during any corrective phase.
Although benchmark indices ended the week higher, market
breadth remained relatively subdued as mid- and small-cap stocks experienced
mild profit booking. This divergence suggests that institutional investors
continue to prefer large-cap stocks while remaining selective in the broader
market. Nevertheless, the ability of broader indices to hold above key
technical support levels indicates underlying resilience.
Overall, market sentiment has improved following the sharp
decline in crude oil prices and the return of selective FII buying. However,
slowing domestic macroeconomic indicators and uncertainty over the global
interest-rate outlook call for a disciplined, stock-specific investment
strategy. Investors should focus on fundamentally strong companies with healthy
balance sheets, robust earnings visibility and improving relative strength.
Large-cap financials, domestic cyclicals and sectors likely to benefit from
lower energy costs appear well positioned.
While the broader market trend remains constructive, traders
should avoid excessive leverage and maintain strict risk management. Sustained
FII inflows, continued moderation in crude oil prices and stability in global
markets will be crucial in determining the strength and sustainability of the
next leg of the market rally.
The author is the SVP, Research, Religare
Broking Ltd.
