Week Ahead: Inflation data, US tariffs, FII flow, global cues among key triggers for Indian stock market

Mint

6 hours ago

The Indian stock market consolidated for the third consecutive week, but also snapped a two-week losing streak, driven by favourable domestic cues, instilling fresh confidence among D-Street investors. This, despite the ongoing trade tensions and uncertainty surrounding tariff negotiations.
Next, investors will monitor some key market triggers in the second week of June. India's retail inflation, global tariff announcements, foreign capital flow, macroeconomic data, and global market cues will dictate the market direction.
Domestic equity benchmarks Sensex and Nifty 50 were range-bound for most of the week, but surged on Friday to settle near the week's high. Supportive domestic developments helped limit the downside, with the highlight being the Reserve Bank of India (RBI)'s monetary policy, which took the market by surprise.
The RBI cut the repo rate by 50 basis points to 5.50 per cent—double the market expectation—and reduced the Cash Reserve Ratio (CRR) by 100 basis points to three per cent, the lowest level since April 2021, further boosting market sentiment. This liquidity boost is expected to lower the cost of funding for banks and spur credit growth, powering rate-sensitive stocks.
On Friday, the Nifty 50 logged its best day in three weeks and rose 252 points, reclaiming the psychologically crucial 25,000-mark after investors rallied behind the RBI's bumper policy measures. Sensex added 738 points to end at 82,189, while both indices gained one per cent for the week.
The Bank Nifty outperformed, rising 1.5 per cent to settle at 56,578.40 after hitting a fresh all-time high of 56,695, extending its winning streak to four consecutive weeks. In the broader markets, both midcap and smallcap indices outperformed the benchmarks, reflecting a risk-on sentiment among investors, with gains ranging between 2.8 per cent and four per cent.
In the coming week, the primary market will witness more action, with some new initial public offerings (IPO) and listings slated across the mainboard and small and medium enterprises (SME) segments. The week will be critical from the domestic and technical points of view. Investors will track domestic macroeconomic data, geopolitical events, and sector-specfic outcomes.
Going forward, market participants will focus on key macroeconomic data for further cues. High-frequency indicators such as the consumer price index (CPI) inflation data and the index of industrial production (IIP) will be closely tracked to gauge demand trends and the central bank's next steps. Additionally, the progress of the monsoon and sowing patterns will be monitored due to their implications for rural consumption.
"By front-loading easing measures, the RBI has underscored its commitment to reviving domestic growth amid global uncertainties. While such a bold approach was expected to unfold gradually, this decisive action reinforces confidence in its intent to support economic recovery while managing inflation risks," said Ajit Mishra, – SVP, Research, Religare Broking Ltd.
One mainboard IPO, Oswal Pumps IPO, will open for subscription this week, while three new SME issues will also open for bidding in the next five days. Among listings, no new IPO-concluded companies are scheduled to be debut on the stock exchanges in the coming week.
Foreign Institutional Investors (FIIs) remained net sellers, offloading ₹ 3,565 crore in equities. However, strong domestic institutional flows offset the pressure, as domestic institutional investors (DIIs) infused ₹ 25,513 crore into the cash segment, providing solid support to the broader market.
According to Ionic Wealth by domestic brokerage Angel One, FIIs hold 18.8 per cent of Indian equities, compared to 30 per cent in other emerging markets (EMs), offering 'significant room for capital infusion'.
Chemicals, telecom, and financials are the sectors attracting FIIs, driven by strong structural themes like the China+1 strategy. India's unique mix of consumption-led growth, robust capex cycles, and high-return-on-equity companies makes it a strong investment case.
On the global front, developments in trade negotiations and movements in US bond yields will continue to influence investor sentiment. Global uncertainties and tariff-related risks could keep markets on edge and add to market volatility.
According to market analysts, profit booking was visible last week due to the ongoing global uncertainty. Mid- and small caps outperformed large caps, driven by better earnings and valuations. A mildly positive bias emerged from strong US job data and expectations of easing US-China trade tensions.
"Benchmark indices attempted recovery after FIIs turned net buyers, encouraged by strong domestic economic indicators amidst a weakening dollar and US bond yields, fostering a 'buy-on-dip' strategy," said Vinod Nair of Geojit Investments.
"While China's rare earth restrictions pose long-term risks and investors await the inflation print in the US, the aggressive RBI rate cut, backed by cooling inflation and a steady GDP outlook, is likely to support investor confidence amidst the ongoing global uncertainties," added Nair.
Shares of Adani Ports & SEZ, Asian Paints, Adani Enterprises, Ambuja Cements, Adani Total Gas, Piramal Enterprises, among several others, will trade ex-dividend next week starting from Monday, June 2. Shares of some stocks will also trade ex-bonus and ex-split. Check full list here
Technically, Nifty 50 has approached the upper band of its prevailing consolidation range of 24,500–25,100. 'A decisive breakout above 25,200 would mark the beginning of a fresh uptrend, with potential to gradually move toward the 25,600–25,800 zone,' said Ajit Mishra of Religare.
On the downside, the 24,400–24,600 range is expected to act as a strong support zone during any corrective phase. Bank Nifty has broken above the key 56,000 mark after trading in a tight range for over a month. Mishra now expects it to move towards 58,000, making this segment crucial for broader market direction.
In case of a dip, the 55,350–56,000 range is likely to provide strong support. For the market's trading strategy, Mishra maintains a positive outlook and suggests 'buy on dips' unless Nifty 50 decisively breaks below 24,600.
However, he clarified that investors should remain selective and focus on fundamentally strong stocks in sectors such as banking, auto, and real estate, which are poised to benefit from lower interest rates.
Other sectors may contribute on a rotational basis. Caution is warranted in areas facing margin pressures or global headwinds, such as FMCG and IT. Traders should remain agile and well-informed, especially in light of the macroeconomic data and persistent global uncertainties.
Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts, consider individual risk tolerance, and conduct thorough research before making investment decisions, as market conditions can change rapidly, and individual circumstances may vary.