Consolidation likely as sentiment stays cautious

Indian equity markets are likely to consolidate in the week ahead, with sentiment staying cautious as investors continue to monitor developments in the West Asia conflict. The ongoing uncertainty around US-Iran negotiations, coupled with disruptions in the Strait of Hormuz, is keeping crude oil prices elevated and risk appetite subdued. The lack of meaningful progress on the geopolitical front is expected to keep pressure on energy price, rupee and equity markets.

Broader markets are likely to remain active, driven by ongoing earnings outcomes and sectoral news flow driving near-term moves. Shipbuilding, power, defence, capital goods and select metal stocks are expected to be in focus, supported by robust order books, grid expansion, summer power demand and continued infrastructure execution.

Globally, this week will be heavy on macro events, with interest rate decisions due from the US Federal Reserve, European Central Bank, Bank of England and Bank of Japan. Key data releases such as US GDP, Eurozone CPI, China PMI and US Manufacturing PMI will also be tracked closely. Domestically, India’s fourth-quarter GDP print and currency reaction to global developments will remain important indicators. The result season also gathers pace, with earnings expected from Ultratech Cement, Coal India, Hindustan Unilever, Kotak Mahindra Bank, Bajaj Finance and Cholamandalam Investment and Finance Company this week.

Last week, the Nifty 50 declined 1.9 per cent, with broader markets holding up relatively better — the Nifty Midcap 100 was down 0.9 per cent and the Nifty Smallcap 100 ended nearly flat at +0.01 per cent. Sector performance was sharply divergent. Nifty FMCG (+4.9 per cent), Nifty Energy (+4.5 per cent), and Nifty Media (+2.9 per cent) outperformed on defensive and thematic buying, while Nifty IT (-10.3 per cent) was the clear laggard, amid continued concerns over AI-led disruption to large outsourcing models and weak management commentary from HCL Technologies & Infosys.

India’s defence and shipbuilding ecosystem remains a strong structural theme. The Nifty India Defence Index has surged 32 per cent over the past year, reflecting optimism around accelerating indigenisation, record approvals and export opportunities. Indian Defence Minister’s visit to Germany resulted in a Defence Industrial Cooperation Roadmap, while discussions around the proposed $8 billion six-submarine project remain significant. Additionally, deeper engagement with South Korea across defence, semiconductors and shipbuilding adds to the long-term opportunity. Both countries also agreed on a framework that supports India’s Rs 2.2 lakh crore pipeline of 400+ vessel procurements. With Strait of Hormuz-related disruptions highlighting logistics vulnerabilities, domestic shipbuilding and maritime infrastructure may continue attracting investor attention.

On the consumption side, the emerging weather setup presents a mixed picture. Skymet Weather Services projects the 2026 Southwest Monsoon at 94 per cent of the long-period average, with El Niño conditions expected to strengthen through the second half, raising the risk of uneven crop output and tighter farm incomes. This may create near-term pressure for India’s farm related sectors including fertilisers, agrochemicals, autos (2W and tractors), and rural-focused fast-moving consumer goods companies. On the positive side, elevated temperatures and prolonged heatwaves could support demand for cooling products, packaged beverages, and power backup solutions, benefiting select consumer durables and beverage companies.

(The writer is Head of Research, Wealth Management, MOFSL)