Indian equities ended the week higher, powered by gains in financials, realty and capital goods, while softer crude oil prices, renewed foreign inflows and a recovery in the rupee improved risk appetite. Sentiment was also supported by global relief after the US-Iran agreement.
The Sensex rose 1.69% for the week and the Nifty gained 1.65%, despite both benchmarks slipping nearly 1% on Friday after a four-session rally. The Sensex ended at 76,802.88, while the Nifty closed at 24,013.10. Profit-booking and a sharp fall in information technology (IT) stocks capped gains, but strength in domestic-facing sectors helped the market close the week in positive territory.
Domestic sectors lead
Domestic-focused sectors were the main support for the market this week. The BSE Capital Goods and Realty indices gained more than 5% each, aided by improving risk appetite, lower crude prices and hopes of stronger investment activity.
Financial stocks also remained in focus after the National Stock Exchange (NSE) filed its draft red herring prospectus (DRHP), reviving expectations around the exchange's long-awaited listing and improving sentiment towards capital-market-linked companies.
Yudhajit Baul, founder of Yudhajit Financial Services said, “We expect Indian equities to gradually catch up with the global markets as there has been a positive momentum in earnings growth. The pick up in momentum in equities will likely be more selective than broad based. Banking and financial services, energy and infrastructure and consumer discretionary may lead in this phase.”
IT spoils the party
However, gains were capped by weakness in technology stocks, which led Friday's sell-off. The BSE IT index fell 1.3% during the week, with most of the decline coming on Friday, when the index dropped around 4%. Infosys, TCS and Tech Mahindra declined between 2% and 6%.
Shashwat Singh, fundamental analyst at Bajaj Broking, said the correction in Nifty IT heavyweights reflects “deep-seated structural anxiety” around AI and a cyclical slowdown in enterprise spending. Accenture’s softer guidance acted as the trigger for this week’s sell-off and led to a valuation de-rating across domestic IT majors.
“The market will be focused on how individual management navigates these headwinds, specifically looking for concrete evidence of AI monetization, pipeline conversion rates, and localized demand recovery,” he added.
Global tailwinds
Global developments also supported sentiment for most of the week. The US-Iran agreement and reopening of the Strait of Hormuz eased concerns over energy supplies, pushing Brent crude towards $79 a barrel. Lower crude prices are positive for India's inflation and current account outlook.
Indian equities outperformed Hong Kong and Thailand during the week, but lagged the region's best-performing markets. South Korea's KRX 100 surged 13%, while Taiwan's Taiex gained 5%, compared with the Nifty's 1.65% rise.
Meanwhile, foreign investors returned as buyers, purchasing equities worth more than ₹3,760 crore during the week, while domestic institutional investors remained supportive with net purchases of ₹8,267 crore.
"India's underperformance versus South Korea and Taiwan is structural, driven by AI and semiconductor tailwinds there and valuation concerns here. Relative performance will depend on either a shift in global risk appetite or a domestic earnings inflection over the next four to six weeks," said Rajesh Singla, founder and chief executive officer (CEO), Alpha AMC.
Monsoon in focus
Despite the market's weekly gains, weak progress of the southwest monsoon has emerged as a key risk. India is facing a rainfall deficit of around 40% with central India the worst hit, raising concerns over sowing in rain-fed states such as Maharashtra, Madhya Pradesh and Chhattisgarh. A prolonged dry spell could hurt rural demand, push up food inflation and weigh on consumption-linking sectors.
Singla said below-normal rainfall may pressure rural-facing businesses, though markets are likely to respond through sector rotation rather than a broad correction.
IPO pipeline revives
Improving market sentiment has also revived hopes for the primary market. Long awaited, NSE and Reliance Jio have filed their DRHP this week boosting expectations for large listings. However, experts feel investor appetite will ultimately depend on earnings visibility and sustained capital flows over the next six months.