<p>Indian markets are expected to remain in consolidation mode as investors track progress on the India-US trade deal with the tariff deadline approaching on July 9. This week would mark the start of the Q1FY26 earnings’ season with the TCS result announcement on Thursday, July 10. Meanwhile, the pre-quarterly business updates would continue to drive stock/sector specific action. Export-driven sectors including IT, auto and pharma would be in focus amidst anticipated boost from the potential trade agreement with the US. Momentum in defence stocks is expected to continue after Defence Acquisition Council (DAC) approved capital-acquisition proposals worth over Rs1 lakh crore last week.</p>.<p>In a major boost for the economy, the all-India cumulative rainfall surged to 110% of its long-period average (LPA) as of 1st July 2025. The early onset and strong progress of the 2025 southwest monsoon has provided a timely boost to the agricultural sector. The favourable monsoon outlook bodes well for both kharif and rabi output, ensuring better water availability and supporting rural incomes. Overall, the rural outlook remains positive, with improved farm activity, higher crop coverage, and enhanced irrigation prospects likely to drive rural demand, agri-input consumption, and broader economic recovery in the coming months.</p>.<p>Last week, Nifty50 ended with a loss of 0.7% at 25,461 as profit booking emerged after the sharp up move of over 2% in the previous week. In addition, cautious investor sentiment prevailed ahead of the approaching tariff deadline. The broader market outperformed with Nifty Midcap100 and Smallcap100 indices closing with moderate gains of 0.5% and 0.2% respectively. From a monthly point of view, Nifty ended higher for the fourth successive month in June 2025 (+3.1% month-on-month or MoM) to close above 25,000 after September 2024. The Nifty Smallcap 100 (+6.7% MoM) and Nifty Midcap 100 (+4% MoM) outperformed the Nifty-50 during the month. In terms of institutional flow, FIIs were net buyers for the fourth consecutive month, investing Rs 7,489 crore in June 2025; while domestic institutional investment inflows remained healthy at Rs 72,674 crore for the month.</p>.<p>Auto volumes for June 2025 indicate a mixed trend, with two-wheelers showing a modest recovery, while commercial vehicles and passenger vehicles continued to underperform, trailing FY26 growth expectations. Tractors remain a bright spot with strong June 2025 volumes and positive outlook supported by normal monsoon, higher MSPs, and improved rural liquidity. </p>.<p>Banking sector earnings for 1QFY26 is likely to remain flat year-on-year (YoY) with meaningful improvement expected from the second half (H2) of FY26. Net interest margins (NIMs) are set to decline in H1FY26 before stabilising in H2. Asset quality is broadly stable for large banks, though microfinance institutional stress persists. </p>.<p>We expect revenue/PAT for the capital goods sector coverage universe to grow 14%/12% YoY in Q1 of FY26. </p>.<p>On the global front, with the July 9 tariff deadline approaching, US officials are prioritising phased or interim agreements rather than comprehensive pacts. Investors would be closely monitoring developments around potential U.S. trade deals with major economies. A breakthrough in the U.S.-India trade deal would be a key catalyst for Indian markets, particularly benefiting export-oriented sectors.</p>.<p><span class="italic">(The writer is Head – Retail Research, Wealth Management, Motilal Oswal Financial Services Limited)</span></p>
<p>Indian markets are expected to remain in consolidation mode as investors track progress on the India-US trade deal with the tariff deadline approaching on July 9. This week would mark the start of the Q1FY26 earnings’ season with the TCS result announcement on Thursday, July 10. Meanwhile, the pre-quarterly business updates would continue to drive stock/sector specific action. Export-driven sectors including IT, auto and pharma would be in focus amidst anticipated boost from the potential trade agreement with the US. Momentum in defence stocks is expected to continue after Defence Acquisition Council (DAC) approved capital-acquisition proposals worth over Rs1 lakh crore last week.</p>.<p>In a major boost for the economy, the all-India cumulative rainfall surged to 110% of its long-period average (LPA) as of 1st July 2025. The early onset and strong progress of the 2025 southwest monsoon has provided a timely boost to the agricultural sector. The favourable monsoon outlook bodes well for both kharif and rabi output, ensuring better water availability and supporting rural incomes. Overall, the rural outlook remains positive, with improved farm activity, higher crop coverage, and enhanced irrigation prospects likely to drive rural demand, agri-input consumption, and broader economic recovery in the coming months.</p>.<p>Last week, Nifty50 ended with a loss of 0.7% at 25,461 as profit booking emerged after the sharp up move of over 2% in the previous week. In addition, cautious investor sentiment prevailed ahead of the approaching tariff deadline. The broader market outperformed with Nifty Midcap100 and Smallcap100 indices closing with moderate gains of 0.5% and 0.2% respectively. From a monthly point of view, Nifty ended higher for the fourth successive month in June 2025 (+3.1% month-on-month or MoM) to close above 25,000 after September 2024. The Nifty Smallcap 100 (+6.7% MoM) and Nifty Midcap 100 (+4% MoM) outperformed the Nifty-50 during the month. In terms of institutional flow, FIIs were net buyers for the fourth consecutive month, investing Rs 7,489 crore in June 2025; while domestic institutional investment inflows remained healthy at Rs 72,674 crore for the month.</p>.<p>Auto volumes for June 2025 indicate a mixed trend, with two-wheelers showing a modest recovery, while commercial vehicles and passenger vehicles continued to underperform, trailing FY26 growth expectations. Tractors remain a bright spot with strong June 2025 volumes and positive outlook supported by normal monsoon, higher MSPs, and improved rural liquidity. </p>.<p>Banking sector earnings for 1QFY26 is likely to remain flat year-on-year (YoY) with meaningful improvement expected from the second half (H2) of FY26. Net interest margins (NIMs) are set to decline in H1FY26 before stabilising in H2. Asset quality is broadly stable for large banks, though microfinance institutional stress persists. </p>.<p>We expect revenue/PAT for the capital goods sector coverage universe to grow 14%/12% YoY in Q1 of FY26. </p>.<p>On the global front, with the July 9 tariff deadline approaching, US officials are prioritising phased or interim agreements rather than comprehensive pacts. Investors would be closely monitoring developments around potential U.S. trade deals with major economies. A breakthrough in the U.S.-India trade deal would be a key catalyst for Indian markets, particularly benefiting export-oriented sectors.</p>.<p><span class="italic">(The writer is Head – Retail Research, Wealth Management, Motilal Oswal Financial Services Limited)</span></p>
