Markets to sustain their uptick

We expect Indian market to witness a sustained uptrend, driven by easing of global geo-political concerns, decline in crude oil prices and the dollar index coupled with news flows around a potential trade deal between US and India. We maintain a positive outlook on domestically driven sectors such as banking, financials, capital markets, defence and monsoon-linked segments (including agri-inputs, tractors, rural consumption), which are well-positioned to benefit from ongoing policy support and seasonal tailwinds. 

Key macro-economic data to watch this week includes commentary from the US Federal Reserve, Manufacturing and Services PMI for US, China, India and India’s Industrial Production data for May.

Last week, Nifty50 ended with strong gains of 2.1% at 25,638 making a fresh 2025 high of 25,654 during Friday’s session. The broader market outperformed with Nifty Midcap100 and Smallcap100 gaining 2.4% and 4.3% respectively. Amongst sectors, Nifty Metal was the top gainer, rising by 4.8%, buoyed by improving global demand amid weak US dollar. Energy, Banking and Financial Service indices followed suit with gains of 2-2.5% each. Defence stocks were in focus on the back of NATO’s resolution to increase defence spends, presenting a significant export opportunity for India. Foreign Institutional Investors (FIIs) made a strong comeback as net buyers during the last week, with inflows exceeding ₹12,500 crore on Thursday — highest single-day buying in the last eight months.

On the global front, US President hinted at significant progress in negotiations with India for a long-awaited bilateral trade agreement between the two countries. The US Dollar Index declined to multi-month lows around 97 level and crude oil prices have also cooled off significantly, dropping from a five-month high of $81 per barrel to around $68. These positive developments bode well for the Indian markets with Nifty likely to move upwards towards its previous life highs.

With a cumulative 100 bps reduction in the repo rate by the RBI, a gradual repricing of deposits, and the anticipated benefits from the CRR cut, we expect the earnings trajectory for banking and financial companies to improve. We continue to prefer large-cap banks, as their valuations appear reasonable given the positive earnings outlook. We are positive on the NBFC sector as it will benefit from improved demand momentum and margin expansion in the declining interest rate cycle. Meanwhile, capital market-related stocks are expected to benefit from heightened activity in the broader market and a robust IPO pipeline.

Real estate demand is in an uptrend in the Indian markets. With the timely execution of a strong project pipeline, realty companies are expected to achieve robust collections. Further, with strong cash flow generation,  they are shifting focus towards business development to sustain the strong growth trajectory. We prefer companies with strong geographical diversification and a fine balance of residential and commercial assets (office/retail/hospitality) to reap the benefit of strong growth visibility of both asset classes.

There could be renewed focus on rural-linked sectors as the monsoon improved significantly over the past week with cumulative rainfall as of 27th June standing 10% above the long-period average.

(The writer is Head – Retail Research, Wealth Management, Motilal Oswal
Financial Services Limited)