Markets likely to remain range-bound

Benchmark indices are likely to remain range-bound this week, while select midcap and smallcap stocks could outperform, supported by healthy earnings and a strong sectoral outlook. Market sentiment has improved following the announcement of a 60-day ceasefire extension between the US and Iran, which has eased geopolitical concerns and pushed Brent crude down to $91 per barrel, a decline of nearly 17 per cent from its recent peak. The easing in crude prices has also supported the Indian rupee, which has strengthened by 1.8 per cent from its record low of Rs 96.84/USD to the Rs 95/USD, providing relief on inflation and external balance concerns.

While global cues are turning supportive, the domestic outlook warrants some caution, with the IMD forecasting a below-normal monsoon and strengthening El Niño conditions, which could weigh on agricultural output and rural demand. Going forward, the sustainability of the market recovery will depend on continued progress in geopolitical negotiations, stability in crude oil prices and the trajectory of foreign fund flows. Key events to watch this week include India and US Manufacturing PMI data, India’s April IIP release and the RBI Monetary Policy Committee meeting scheduled during June 3–5.

Last week, equity markets remained largely range-bound with a mildly negative bias. The Nifty50 declined 0.7%, while broader markets outperformed, with the Nifty Midcap100 gaining 0.5% and the Nifty Smallcap100 advancing 1.0%, reflecting continued stock-specific buying and healthier participation beyond large caps. Sectorally, performance remained mixed. Nifty Energy (+1.6%), was among the top gainers last week, aided by easing crude oil prices and strong momentum in power-related stocks. Auto (+1.2%), Metal (+1.3%), IT (+0.6%) and Bank (+0.3%) also ended higher, supported by healthy demand trends, firm global commodity prices, currency-related tailwinds for exporters and selective buying in financials. On the downside, Nifty FMCG (-1.7%) was the worst performer amid concerns over rural demand and rising input-cost pressures, while Nifty Pharma (-0.9%) witnessed profit booking after recent outperformance despite maintaining a favourable long-term outlook.

The recent visit of US Secretary of State Marco Rubio to India and progress toward a broader India-US trade agreement have improved sentiment for export-oriented sectors such as IT services and pharmaceuticals. In parallel, the Quad’s announcement of a $20 billion Critical Minerals Framework represents a strategically important long-term development for India’s metals, mining and clean-energy ecosystem. The initiative aims to reduce dependence on China-dominated supply chains across critical minerals, rare earth processing and recycling, creating long-term opportunities for domestic companies exposed to strategic metals and battery-material infrastructure.

Sectorally, defence, power and metals continue to stand out. Defence stocks remain supported by strong order visibility, rising domestic procurement, record defence exports and expectations surrounding India’s proposed acquisition of 114 Rafale fighter jets.

Overall, while geopolitical developments and crude oil prices remain key monitorables, the recent easing in energy prices, improving diplomatic engagement and resilient domestic fundamentals have strengthened the near-term market outlook. However, risks from monsoon uncertainty, FII flows and global macro developments will continue to warrant close monitoring.

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