Nasdaq Rout Expected to Weigh on Indian Markets

Indian Equity Markets End Lower for Second Consecutive Week

The Indian equity markets experienced a decline for the second consecutive week, with benchmark indices slipping nearly 1% amid global and domestic headwinds. The Nifty 50 fell 181 points to settle at 23,367, as Foreign Institutional Investors (FIIs) continued to sell and India's central bank struck a cautious outlook.

Global and Domestic Headwinds

The dominant overhang through the week was the US-Iran standoff, with President Donald Trump's remarks on June 1 suggesting Tehran was eager to negotiate offering brief relief. However, fresh military exchanges and uncertainty over the Strait of Hormuz kept crude oil prices elevated, posing a significant concern for the Reserve Bank of India.

Read also: Nifty Falls Over 260 Points, Suggests Weak Market Open Amid Global Selloff and Middle East Tensions

RBI Holds Rates Steady, Trims GDP Growth Estimate

The Reserve Bank of India (RBI) held its benchmark rate steady at 5.25% with a neutral stance during its Monetary Policy Committee (MPC) meet this week. However, the central bank revised its FY27 inflation forecast upward, warning that retail prices could approach the upper tolerance band by the third quarter. The RBI also trimmed its GDP growth estimate to 6.6%, citing higher energy prices, input cost pressures, and supply chain disruptions.

Market Capitalisation Erodes, FPIs Continue to Sell

FPIs continued to sell in the Indian market, offloading shares worth over Rs 31,000 crore during the week. The rupee, however, defied the gloom, strengthening for a third straight week to close at 95.34 per dollar, thanks to actions announced by RBI. Total BSE market capitalisation eroded by more than Rs 3 lakh crore during the week.

Read also: Nifty, Sensex Expected to Open Lower Amid Global Technology Selloff

Sectoral Performance

In sectoral performance, the Capital markets index was the worst performer, shedding 3.6%, while FMCG, realty, metal, and infrastructure indices each fell roughly 2%. Midcaps underperformed, with the Nifty Midcap 100 dropping 1.5% to snap a two-week winning streak. Stocks in media, consumer durables, and PSU Banks posted gains of 7%, 1.7%, and 1.2% respectively.

US Markets Face Difficult Week

US markets also faced a difficult week, with the Nasdaq sliding 4.68% as early AI-driven optimism gave way to concerns over stretched valuations and a pipeline of equity issuance. A stronger-than-expected May payrolls report pushed Treasury yields higher, reinforcing fears that the Federal Reserve may hold rates restrictive for longer.

Looking Ahead

Markets are likely to remain on edge, with crude oil prices, FII flow trends, a sharp selloff in the US markets on Friday, and any fresh signals from the Iran nuclear talks set to drive sentiment in the near term.

Corrective Phase Continues

On the weekly timeframe, Nifty closed at 23,366.70, shedding 0.77% for the week. The index continues to hold above a key support trendline that has defended multiple tests, most recently in April when a sharp rebound off this level signalled renewed buying interest. The market thus remains in a corrective phase without a clear directional bias.

Stocks to Watch

Among the stocks expected to perform better during the week are Adani Energy, Fortis Healthcare, Adani Enterprises, Yes Bank, NBCC, and Laurus Labs.