A quick sprint on Friday helped Indian markets close a volatile week with solid gains, as signs of peace in West Asia rekindled investor optimism worldwide. As crude oil slipped below $90, buyers who stayed away during a turbulent week trooped in, helping the Street clock the best gains in eight weeks.
The Sensex rose 1.7% for the week, while the Nifty gained 1.1%. Most of the gains came on Friday, when the Nifty jumped 2% to close at 23,622.90 and the Sensex 2.3% to 75,527.94, the highest close for both since 8 April. On that day, Indian equities had rallied nearly 4%, cheered by a US-Iran ceasefire announcement.
Volatility cooled sharply: the India VIX, which measures expected market volatility, declined from around 17 to 14.7 during the week, slipping below the key 15-mark for the first time since the war erupted in West Asia. On 27 February, a day before the conflict flared, the VIX stood at 13.70.
Shah said banking and financial services may continued to lead market gains, supported by healthy credit growth and improving business momentum. He also sees opportunities in select capital goods and auto ancillary companies.
Bhowar expects increased market polarity, with paints, aviation and IT likely to lead, while traditional high-yield defensive stocks and upstream oil companies may underperform.
India mixed vs global peers
Compared with key global markets, India delivered a mixed performance during the week. Domestic markets did better than Japan, Malaysia and South Korea, but trailed Indonesia, France and Brazil, where weekly gains ranged between 2% and 8%.
Jonagadla remained cautious. “Until FX, crude and trade visibility align, India can participate in rallies, but is unlikely to lead them,” he said, adding that reports suggesting the first tranche of the India-US trade agreement may come only by mid-July could keep investors selective.
Crude below $90 lifts sentiment
Crude oil was the key macro driver for the week. Brent slipped 2.2% to around $86.88 a barrel as geopolitical tensions eased. For India, which depends on imports for more than 85% of its crude needs, lower oil prices can help ease inflation pressure and support the rupee.
“Crude oil dropping below $90 offers India a significant macroeconomic advantage. It shifts the domestic inflation outlook, eases pressure on the fiscal deficit, and bolsters the rupee,” Bhowar said. He added that lower oil prices could give the Reserve Bank of India more policy flexibility and support a margin-expansion cycle for corporate India.
Shah said softening crude is positive for companies where crude derivatives form a large part of input costs, including chemicals, paints, tyres and select industrial stocks.