Indian equity markets ended the week with sharp losses as investors turned cautious ahead of key events. The BSE Sensex plunged 1,092 points, or 1.44%, to close at 74,775.74, while the NSE Nifty fell 359 points, or 1.50%, to settle at 23,547.75. During the day, the Nifty slipped to an intraday low of 23,485 as selling pressure intensified towards market close. For most of the trading session, markets moved within a narrow range as investors remained cautious amid uncertainty surrounding developments in the United States and Iran. However, profit booking accelerated during the last hour of trade, triggering a broad-based decline across sectors and dragging benchmark indices lower. Despite the weakness in frontline indices, the Nifty Midcap index advanced nearly 0.6% and the Nifty Smallcap index gained around 1%, indicating selective buying interest in the broader market segment.
A major focus for investors this week will be the RBI Monetary Policy Committee (MPC) meeting scheduled from June 3-5, with market participants expecting the central bank to maintain a cautious stance as inflation risks remain elevated due to rising fuel prices, a weakening rupee, and higher wholesale inflation. The six-member panel, led by RBI Governor Sanjay Malhotra, will review interest rates, inflation trends, liquidity conditions and the country's economic growth outlook. Investors will closely watch the policy announcement for signals on borrowing costs and future monetary policy direction. According to India Business Trade, any commentary from RBI Governor Sanjay Malhotra regarding interest rates, liquidity, inflation outlook, or economic growth could significantly influence market sentiment. The central bank's policy decision comes at a time when inflation remains a key concern for policymakers, with sustained high crude prices and currency depreciation adding to inflationary pressures. This week's policy outcome will be crucial for determining the trajectory of interest rates and their impact on market liquidity and corporate earnings.
Global geopolitical developments are expected to influence market sentiment significantly. Crude oil prices fell sharply on Friday, with oil futures declining more than 2% and touching their lowest level in six weeks amid hopes of a ceasefire involving the US, Israel and Iran. Reports from Iranian state media suggested that a proposed understanding between the United States and Iran could involve the release of $12 billion in frozen Iranian assets, though similar reports were earlier dismissed by the White House. Any progress or setback in negotiations could impact global risk sentiment and commodity prices. Brent crude eventually slipped nearly 10% during the week to around $91.2 per barrel, marking its lowest level in six weeks and putting it on track for its steepest monthly decline since 2020. For an oil-import-dependent economy like India, sustained high crude prices can increase inflation, widen the trade deficit, weaken the rupee, and pressure corporate earnings. Lower oil prices generally benefit India by reducing import costs and easing inflationary pressures.
Domestic institutional participation remained a key stabilising factor for Indian markets during the week. According to market data from Goodreturns, Foreign Institutional Investors (FIIs) continued their aggressive selling streak, pulling out ₹23,734 crore from the cash market during the week. However, Domestic Institutional Investors (DIIs) largely offset the pressure by investing ₹25,803 crore, helping prevent a deeper market correction. As reported by India Business Trade, Foreign Portfolio Investors (FPIs) were aggressive sellers last week, offloading more than ₹20,000 crore worth of Indian equities in a single session, partly due to MSCI index rebalancing. The contrasting flows highlight the continued divergence between foreign and domestic investor sentiment in the current market environment. Meanwhile, the Indian rupee strengthened against the US dollar towards the end of last week, supported by easing crude prices and improved global sentiment, with the currency appreciating nearly 2% from its recent record low. According to Religare Broking, the RBI has been actively intervening in forex markets to stabilize the currency, while global dollar demand remains strong.
Investors will closely monitor multiple economic indicators this week that could shape market direction. According to India Business Trade, strong PMI data could reinforce confidence in India's growth outlook, while weaker-than-expected numbers may trigger concerns about economic momentum. The final HSBC Manufacturing PMI data for May will be released on Monday, followed by Services PMI and Composite PMI figures on Wednesday. GDP growth figures will also remain under focus as investors assess the strength of the domestic economy, with Q4 FY26 GDP Growth expected at 7.2-7.3%. Monthly automobile sales data scheduled for release on June 1 will provide valuable insights into consumer demand and industry trends across the automobile sector. Banking, energy, auto, and export-oriented sectors are likely to remain in focus this week, with market participants closely monitoring global developments and domestic policy decisions that could significantly influence sectoral performance. As per Religare Broking, stock-specific opportunities in banking, financial services, auto and export-oriented sectors may emerge depending on the outcome of key economic data releases, with the interaction between RBI policy, crude oil prices and global geopolitical developments ultimately determining market direction.
