RBI MPC Meeting and Key Global Developments to Influence Indian Stock Market Directions This Week

Indian Stock Market Declines for Sixth Straight Week Amid Global and Domestic Uncertainty

The Indian stock market witnessed a decline for the sixth consecutive week, slipping by nearly 0.5% due to heightened volatility driven by a mix of global and domestic factors. The week, which was shortened by holidays, began on a weak note as rising US-Iran tensions and a surge in crude oil prices dampened sentiment, leading to aggressive selling.

However, the market rebounded mid-week as geopolitical concerns eased and oil prices softened. Despite this rebound, volatility persisted due to inconsistent global cues, sustained foreign institutional investor outflows, a weakening rupee, and inflation worries. The benchmark indices, Nifty and Sensex, closed the week at 22,713.10 and 73,319.55, respectively.

Market Outlook for Next Week

Read also: Expert Portfolio Manager Raja Venkatraman Names Top Investment Picks for June 4

According to Ponmudi R, CEO of Enrich Money, markets in the coming week are expected to remain volatile and largely driven by external developments, with direction shaped more by global cues than domestic fundamentals. Investors will likely focus on geopolitical developments in the Middle East, trends in crude oil prices, movements in the rupee, and foreign investor activity.

The Reserve Bank of India's monetary policy decision will be a key event, with participants closely tracking guidance on interest rates and the inflation outlook, said Ajit Mishra, SVP, Research, Religare Broking. The RBI's six-member rate-setting committee will meet six times over the fiscal year to assess macroeconomic conditions and make important decisions on policy rates and liquidity measures.

The US-Iran war appears to be intensifying, with Iran reportedly shooting down two US aircraft, while Donald Trump has warned that he will unleash "all hell" if Tehran does not agree to a deal or reopen the Strait of Hormuz. The conflict could escalate in the coming days in the absence of a truce deal.

Read also: MarketSmith India's 4 June Stock Recommendations

Crude oil prices have maintained a sharp upward momentum, with the Brent crude benchmark climbing to $109 on Saturday. Before the conflict began, Brent crude was trading near $72 per barrel, but has surged by over 50% since the US and Israel launched strikes on Iran on February 28.

The rupee recorded one of its sharpest single-day rallies in years on Thursday, ending 152 paise stronger at 93.18 against the US dollar after the Reserve Bank introduced a series of measures to curb banks' activity in the onshore forward market. Earlier in the week, the domestic currency had weakened past the 95 mark on Monday before settling at 94.70.

Foreign institutional investors (FIIs) executed their biggest-ever sell-off in Indian equities in March, offloading shares worth ₹1.22 lakh crore during the month. This is the highest monthly outflow on record, driven by the country's exposure to rising crude oil prices amid intensifying tensions in the Middle East.