Makret update and week ahead

Indian Market

Indian equity markets ended the week on a strong note, supported by resilient domestic economic fundamentals, healthy GST collections, improving industrial activity, and continued expansion in both manufacturing and services sectors. Although the week began with two consecutive sessions of profit booking amid cautious global sentiment, markets recovered strongly during the second half, driven by improving investor confidence, expectations of easier global monetary policy, and sustained buying in frontline stocks. Positive domestic macroeconomic data, particularly robust GST collections and stronger industrial production, reinforced confidence in India's growth outlook. The benchmark indices extended their gains for the second consecutive week, while broader markets also participated in the rally. During the week, the Sensex advanced 663 points (0.86%) to close at 77,764, while the Nifty 50 gained 215 points (0.90%) to settle at 24,271. The Midcap and Smallcap indices rose 1.18% and 1.12%, respectively. Technically, Nifty support is placed around 24,000–23,650, while resistance is seen in the 24,600–25,000 zone.

Global Market Overview

Global markets ended the week with a positive bias as softer US economic data strengthened expectations of an eventual Federal Reserve rate cut, improving overall investor sentiment. In the United States, weaker-than-expected June non-farm payrolls reinforced hopes that the Fed may adopt a less aggressive policy stance in the coming months. On a weekly basis, the Dow Jones Industrial Average rose nearly 2% to close at 52,900.07, the S&P 500 gained 1.8% to 7,483.24, while the Nasdaq Composite advanced 2.1% despite weakness in semiconductor stocks, ending at 25,832.67. European markets also remained firm, supported by easing inflation and optimism over economic recovery, while Asian markets posted broad-based gains led by Japan, Hong Kong and South Korea. China's manufacturing activity returned to expansion territory, and Japan's services sector also resumed growth, indicating improving business conditions across major Asian economies. Overall, expectations of easier global monetary policy and improving macroeconomic indicators continued to support global risk assets.

Key Reasons for Market Movement

·         Strong GST collections reflected resilient domestic consumption and healthy economic activity.

·         Higher industrial production reinforced confidence in India's manufacturing-led growth.

·         Softer US jobs data strengthened expectations of future Federal Reserve rate cuts

·         Manufacturing and services PMI remained comfortably in expansion territory

·         Stable crude oil prices supported inflation expectations and improved market sentiment.

·         Positive global cues and improved risk appetite encouraged buying across equities

 US–Iran Warfare

Geopolitical risks remained relatively contained during the week despite sporadic tensions in the Middle East. Shipping activity through the Strait of Hormuz continued to normalize, easing concerns over global energy supplies. However, investors remained watchful of the upcoming US-Iran discussions scheduled in Doha, as progress in diplomatic negotiations could further reduce geopolitical risk premiums. Although isolated military incidents continued to emerge, markets largely viewed the ceasefire arrangement as holding, thereby preventing any significant disruption to global trade or energy markets.

Crude Oil

Crude oil prices remained relatively stable throughout the week as improving shipping activity through the Strait of Hormuz eased supply concerns. Brent crude continued to trade near USD 70 per barrel, significantly below the highs witnessed during the peak of the Middle East conflict. Lower oil prices have reduced concerns regarding imported inflation, current account pressures, and corporate input costs, providing meaningful support to emerging markets such as India. Going forward, the sustainability of lower crude prices will remain an important factor influencing inflation, fiscal stability, and corporate earnings.

Economy

India's macroeconomic indicators continued to reflect resilience despite moderation in certain segments. Industrial production accelerated to 5.1% in May, led by robust manufacturing and electricity generation, while capital goods production remained particularly strong, indicating healthy investment activity. GST collections surged 13.9% year-on-year to Rs 1.95 lakh crore, highlighting resilient domestic demand and improved tax compliance. Although manufacturing and services PMI moderated during June, both indices remained comfortably above the 50-mark, indicating continued economic expansion. Meanwhile, forex reserves increased modestly to USD 672.59 billion, providing adequate external stability. Overall, India's macroeconomic fundamentals remain supportive despite slower services growth and a higher fiscal deficit during the initial months of FY27.

Sector Updates

Banking & Financials

·         Strong GST collections and improving economic activity are expected to support credit growth

·         Stable liquidity conditions and healthy balance sheets continue to benefit the banking sector

 Capital Goods & Infrastructure

·         Robust growth in capital goods production indicates sustained investment momentum

·         Infrastructure and industrial sectors continue to benefit from government spending.

Manufacturing

·         Manufacturing PMI remained firmly in expansion territory despite moderating growth

·         Strong production of capital goods and infrastructure-related products remains encouraging.

Information Technology

·         Global technology stocks witnessed mixed performance amid continued semiconductor volatility.

·         Long-term digital transformation and AI spending continue to support sector fundamentals.

Consumer & Retail

·         Strong GST collections indicate healthy consumption demand

·         Moderating services growth warrants monitoring, although overall demand remains resilient.

Metals & Industrials

·         Higher manufacturing activity and infrastructure demand continue to support industrial companies.

·         Global recovery in manufacturing remains positive for export-oriented businesses

Outlook for the Upcoming Week

Markets are expected to remain cautiously optimistic, supported by resilient domestic economic indicators and expectations of a more accommodative global monetary environment. Investors will closely monitor developments from the US-Iran talks in Doha, movement in crude oil prices, and foreign institutional investor (FII) flows. Domestically, bank credit growth, deposit growth, and foreign exchange reserve data will provide important insights into liquidity conditions. Globally, key events include the US ISM Services PMI, FOMC meeting minutes, trade balance data, and China's inflation and producer price data. Markets will also closely watch commentary from the US Federal Reserve for further clues on the interest rate trajectory. Technically, Nifty is expected to trade in the 24,000–24,600 range, with a sustained move above 24,600 likely to trigger further upside, while 24,000 remains a crucial support level. Going forward, investors should remain focused on earnings growth, global central bank commentary, crude oil movements, and geopolitical developments while maintaining exposure to fundamentally strong sectors benefiting from India's structural growth story.

Best Regards