Global Market Outlook: Key Cues to Guide Indian Markets

Indian Equity Markets Close Week on a Weak Note

The Indian equity markets closed the week on a weak note, with Friday's session bearing the brunt of the decline. Heavy last-minute selling triggered by MSCI index rebalancing dragged both the Sensex and the Nifty50 sharply lower in the final hours of trade, erasing much of the stability the indices had managed to hold through the earlier part of the week.

Key Statistics

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For the week, Nifty50 fell 171.55 points, or 0.72 percent, to settle at 23,547.75. Persistent FPI outflows added to the pressure, with equity sales totalling Rs 23,734.68 crore during the week. Uncertainty around US-Iran negotiations, rising geopolitical tensions, and firm crude oil prices kept investor sentiment cautious throughout.

However, the broader market held up well, with the Midcap and Smallcap indices each extending their winning streaks into a second consecutive week and touching new highs.

Sectoral performance was mixed, with Telecom, Power, Capital Goods, and PSU Banks posting gains of 2-3 percent each, while Auto and Realty edged up around 1 percent.

Across the Atlantic, US markets performed better, with major indices rising amidst many stocks touching new highs. Hopes of a 60-day ceasefire extension between the US and Iran, along with continued enthusiasm for artificial intelligence stocks, drove buying.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Market Outlook

Looking ahead, domestic markets are likely to open the coming week on a cautious note following Friday's sharp decline. The short-term direction will depend on how the US-Iran deal progresses, and the trajectory of crude oil prices will be a key factor for traders to watch.

Technical Analysis

On the weekly timeframe, Nifty continues to hold above a key trendline that has served as strong support on multiple occasions. Most recently, in April, Nifty tested this trendline and rebounded strongly, indicating renewed buying interest.

However, the index has been consolidating within a narrow range for the past three weeks, reflecting indecision among market participants. A falling red trendline from the highs, along with the 40-week EMA, is currently acting as a resistance zone, leaving the market in a corrective phase without a clear directional bias at present.

On the momentum front, the RMI has generated a bullish crossover, suggesting improving underlying strength. While the broader trend remains positive, a decisive move above the 40-week EMA would be required to confirm the resumption of the primary uptrend.

FII Net Index Futures Position Indicator

The FII Net Index Futures Position indicator is currently at -2,01,309. After remaining deeply negative for an extended period, the indicator has now given a trendline breakout, suggesting an improvement in FII positioning as they continue to reduce their short exposure.

While the indicator remains in negative territory, the recent breakout and gradual reduction in short positions point to improving sentiment. If this trend continues, it could provide a supportive backdrop for a broader market recovery in the coming weeks.

Historical Analysis

Historically, whenever the Client Net Index Futures Position indicator has reached extreme levels, it has coincided with important bottoms in the Nifty50. Similar extremes were seen in March 2025, October 2025, and April 2026, all of which were followed by strong upside moves in the market. Currently, the indicator has once again approached its extreme zone, with the latest reading at 1,53,432. This suggests bearish positioning may be overstretched, increasing the probability of a potential bottom formation around current levels from a broader sentiment perspective.

Sector Rotation

The leading quadrant includes Nifty Auto, Nifty Metals, Nifty FMCG, Nifty Infra, and Nifty MNC, which are showing improving relative strength and potential for outperformance. Nifty PSU, Consumer Durables, and Media are in the weakening quadrant, with momentum declining. Nifty PSU Banks, Nifty Oil & Gas, and Nifty Financials are also in the weakening quadrant but are showing signs of stabilizing momentum.

Stocks to Watch

Among the stocks expected to perform better during the week are Power India, BHEL, Adani Ports, SonaComs, Grasim, SAIL, Biocon, Polycab, CG Power, Adani Ent, and Apollo Hospital.