Dalal Street week ahead: Israel-Iran news, US Fed meeting among 5 key triggers for Indian stock market in coming week
Dalal Street week ahead: A flare-up in tensions between Israel and Iran, persistent uncertainty around the US tariff policy, and foreign capital outflows weighed heavily on the Indian stock market last week. The benchmark Nifty 50 closed at 24,718.60, down 0.68 per cent, on Friday. HDFC Bank, Reliance Industries, ITC, ICICI Bank, and SBI were among the top drags on the index.
For the week ended June 13, the Nifty 50 declined 1.14 per cent, while the Sensex fell 1.30 per cent. Broader market also declined but they still outperformed. The BSE Midcap index fell 0.90 per cent, while the BSE Smallcap slipped 0.13 per cent.
"The Indian equity market witnessed heightened volatility last week, ultimately closing in the red. Early optimism, driven by progress in US–China trade negotiations, was overshadowed by escalating geopolitical tensions after Israel launched a strike on Iran's nuclear facilities. This development sparked a global risk-off sentiment, leading to a rally in safe-haven assets such as gold and US bonds," Vinod Nair, Head of Research, Geojit Investments, observed.
The upcoming week has several key market triggers, including Israel-Iran news, the US Fed policy outcome, and the progress of the monsoon.
"Looking ahead, investors are expected to remain cautious amid premium valuations and geopolitical risks. All eyes are now on the upcoming U.S. Fed meeting, where interest rates are likely to remain unchanged. However, the Fed's commentary and economic projections will be closely scrutinised for future policy cues," said Nair.
News flows surrounding the Israel and Iran conflict will probably be the biggest trigger for markets globally next week.
Tensions in the Middle East have been escalating in recent days, raising concerns that the Israel-Iran conflict could intensify and broaden in scope.
According to the Wall Street Journal, Washington is moving towards more direct involvement in the Israel-Iran episode as the US military is shooting down Iranian missiles fired at Israel, in response to Israel's attacks on Iran's nuclear sites and military leaders.
Meanwhile, British Prime Minister Keir Starmer said on Saturday that the UK is moving military assets, including jets, to the Middle East for contingency support across the region.
The US Federal Open Market Committee (FOMC) meeting, which will begin on June 17 and conclude on June 18, will be a key focus area for investors.
The US Federal Reserve is expected to keep interest rates unchanged amid uncertainty over the impact of US tariff policy on the economy. Recent inflation data suggest that price increases have been largely benign.
The US headline consumer price index (CPI) for May increased at a softer-than-expected pace of 0.1 per cent month-on-month and was 2.4 per cent year-on-year. Core CPI increased 0.1 per cent month-on-month and 2.8 per cent year-on-year.
According to Madhavi Arora, Lead Economist at Emkay Global Financial Services, the market continues to price in two Fed cuts in 2025. The probability of a cut next week is zero, with the next cut expected in October.
"While the CPI print is somewhat reassuring, there remains very little signal in the data, with firms continuing to manage tariffs for now – tariffs will likely only show up in the data (either through higher inflation or lower profit margins) a few months down the line. In such a scenario, the Fed will remain in wait-and-watch mode," said Arora.
After a sharp 7 per cent surge in Brent Crude on Friday, investors will also focus on the trajectory of crude oil prices next week.
Brent crude oil futures gained $4.87, or 7.02 per cent, to settle at $74.23 a barrel after earlier soaring over 13 per cent to an intraday high of $78.50, the strongest level since January 27. For the week, Brent oil prices rallied 12.5 per cent.
India is one of the largest importers of crude oil in the world, and a prolonged period of elevated crude oil prices will result in a higher trade deficit. This may weaken the rupee, reignite inflationary risks, and erode corporate profitability by increasing input costs.
"Crude oil prices are highly susceptible to further spikes. With Iran being OPEC's third-largest oil producer, any further intensification of the conflict raises concerns about potential supply disruptions from the critical Middle East region," Sugandha Sachdeva, Founder of SS WealthStreet, observed.
"Higher crude prices are likely to impact oil marketing companies (OMCs), which will face margin pressure, while input costs for paint and cement companies will rise, impacting their profitability. Transportation and logistics costs will also surge across the economy," said Sachdeva.
Foreign portfolio investors (FPIs) have emerged as the net sellers of Indian equities in the cash segment for the current month. In June so far, they have sold off Indian stocks worth ₹ 4,812 crore in the cash segment amid geopolitical tensions, stretched domestic market valuations, and the rupee's weakness.
Continuous selling by FPIs will weigh on the Indian stock market, potentially keeping it in the lower orbit.
In the coming week, several key macroeconomic data, including India's May WPI Inflation prints and trade balance data on June 16, the eurozone's consumer price index data for May on June 18 and US initial jobless claims on June 18, will be on investors' radar.
Apart from these five key factors, several other developments, such as the progress of the monsoon, the G-7 summit between June 15-17 in Alberta, Canada, the Bank of Japan's policy decision on June 17, and news flows about trade deals between the US and its key trading partners, will be important for the market.
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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.
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