Nifty 50 Ends June Higher in 6 of Last 10 Years: Will the Trend be Repeated?

Indian Benchmark Nifty 50 Index Faces Uncertain June Amid Global Geopolitical Tensions

June is typically a positive month for the Indian benchmark Nifty 50 index, with the index delivering a positive return in six out of the last 10 occasions over the past decade. In the last three years, June has generated gains of over 3% each, with the exception of June 2022, when the Nifty fell 4.85%. However, the current macro and geopolitical environment is vastly different, with the ongoing conflict between the US and Iran leading to an energy shock.

The closure of the Strait of Hormuz, a key passage for global oil and gas needs, has pushed crude oil prices to $95 per barrel, up significantly from the $60 per barrel mark before the conflict began on 28 February. During the height of the Middle East crisis, oil futures reached above $120 per barrel. The impact of high oil prices is non-linear, affecting India's current account deficits and balance of payments, fiscal deficit, growth, and inflation.

Crude Oil Trajectory Holds Key to Stock Market Trend in June

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As markets around the world celebrate a 19% monthly decline in crude prices, expectations are that prices might settle in the range of $70-$75 by the end of the month. Sunny Agrawal, Head of Fundamental Research at SBI Securities, believes that if crude oil prices return to $80-85 per barrel, it will be positive for domestic equities, as this will alleviate pressure on the Indian rupee and turn the narrative favorable for the Indian economy.

Analysts expect a bumpy June quarter earnings season, despite a decent Q4. In Q4FY26, the net income of the Nifty 50 index grew 6.6%, exceeding Kotak Institutional Equities' (KIE) expectation of 2.2% growth. KIE's base-case scenario assumes an end to the West Asia war over the next few days or weeks, with a gradual reopening of the Strait of Hormuz after that. However, even then, the market recovery could be gradual.

KIE also warned that it does not rule out earnings downgrades in the domestic consumption sectors from longer-than-expected disruption to global oil and gas supplies and higher-than-expected input prices.

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

Impact of High Crude Prices on Midcap and Small Cap Stocks

Karan Aggarwal, Co-founder & CIO, Ametra PMS, highlighted that since high crude prices have sustained for more than 90 days, markets would gradually recognize misplaced euphoria. Profitability across midcap and small cap stocks is expected to take a hit of 200-300 bps. With yields hovering around 7%, margin stress in the financial sector might continue into the next quarter.

Foreign Portfolio Investors (FPIs) and the AI Bubble

The relentless selling of Indian stocks by FPIs in favor of markets with AI-related opportunities is creating pressure on Dalal Street and the rupee. India recently lost its ranking in the global market cap board, slipping two slots in a matter of a week. Expecting this trend to end soon, Aggarwal believes that the AI bubble will pop in the next few months, triggering the final phase of FII selling and the onset of a multi-year buying phase by the end of 2026.

Indian Companies' Resilience Amid High Oil Prices

Indian companies are performing well on fundamentals and are likely to ride out the high oil prices without too much damage, believes Vikas Gupta, CEO & Strategist, Omniscience Capital. "This forces FPIs to look deeply at India and consider it as a diversification against an AI Bubble. Because the Indian earnings are more broad-based across the economic spectrum."