Indian equity markets are expected to face pressure in the coming week due to a combination of weak global cues and continued selling by Foreign Institutional Investors (FIIs). On Friday, the Sensex closed 117 points lower at 74,243, and the Nifty 50 declined 50 points to settle at 23,367, driven by losses in major stocks like Trent, TCS, and Reliance Industries.
Global markets have been under strain, with Wall Street experiencing significant declines. The tech-heavy Nasdaq plunged over 4% due to a stronger-than-expected US jobs report, raising concerns about prolonged high interest rates by the Federal Reserve. European markets closed mixed, while Asian equities were broadly lower, with South Korea’s Kospi dropping nearly 6%.
The Reserve Bank of India (RBI) has kept the policy repo rate unchanged at 5.25%, considering rising energy prices and geopolitical tensions. The RBI also increased the investment limit for NRIs and OCIs in equity instruments, aiming to attract foreign capital. However, the central bank's revised inflation and GDP forecasts have reinforced concerns over economic stability.
“While the Reserve Bank of India’s measures to attract foreign capital and the government’s tax relief for foreign investors in government securities could support sentiment, we expect market movement to be driven largely by bottom-up stock picking and sector-specific action in the near term.”
Siddhartha Khemka, Head of Research, Wealth Management, at Motilal Oswal Financial Services
FIIs have been net sellers, offloading shares worth Rs 31,120 crore in the first week of June, while Domestic Institutional Investors (DIIs) have provided some support. Geopolitical tensions, particularly between the US and Iran, have further impacted investor sentiment, with recent military actions escalating concerns.
Rising US Treasury yields, driven by inflation concerns, have made bonds more attractive than equities, adding to the pressure on stock markets. The Nifty 50 index has been trading within a narrow range, reflecting the cautious market sentiment.
Background
The current market conditions are shaped by a mix of domestic and international factors, including geopolitical tensions, inflation concerns, and central bank policies. Investors should closely monitor developments in these areas to gauge future market directions.
Looking ahead, investors should remain vigilant about energy prices, geopolitical developments, and institutional flows, as these factors will likely influence market trends in the near term.
