Markets cheer ceasefire but geopolitical conflict continues to weigh on sentiment
Buoyedby a temporary cease-fire between the U.S. and Iran and signs of de-escalation in the US–Iran conflict, a strengthening rupee after RBI intervention and slowdown in FII selling; equity markets snapped a six-week losing streak, posting their best weekly gains since February 2021 during the week ended.
For the week, the Sensex jumped 4,230.70 points (5.77%) to end at 77,550.25, while the Nifty climbed 1,337.5 points (5.88%) to settle at 24,050.60.Exuberance in the broader market was evident with Nifty Midcap 100 Index and the Nifty small-cap Index advancing nearly 8% and 7.6% respectively. Market breadth expanded significantly, reflecting widespread buying interest across sectors.
After persistent selling over 27 consecutive sessions amounting to a massive Rs 1,72,656 crore outflow, FIIs finally turned net buyers on Friday, with inflows of Rs 672 crore. However, FIIs remained net sellers in Indian equities for the seventh consecutive week, albeit at a moderated pace, offloading shares worth Rs20,710.35 crore.
Meanwhile, DIIs extended their buying streak, purchasing equities worth Rs21,602.32 crore. Observers say that FIIs are determined to sell in India and move money to other markets like South Korea and Taiwan, where the earnings growth prospects are much superior in 2026.Despite current challenges, India remains the fastest-growing large economy with over 6.5% GDP growth. Valuations have corrected, and India’s weight in global portfolios is at a decade low. As growth and earnings recover, both domestic and foreign investors are likely to increase exposure again.
Global investors will wait to see the outcome of the peace talks between US and Iran scheduled over the weekend. The outcome of the peace talks will determine the trend in crude prices, which, in turn, will dictate market trends. If the talks lead to de-escalation in the conflict and drive crude prices down, the markets, particularly markets like India which are energy import-dependent, will bounce back. The reverse will happen if the peace talks fail and crude spikes further.
Domestic investors have shown strong resilience and continue to invest with a long-term view. SIP flows and investor confidence remain intact. While FII selling has been heavy, India’s fundamentals—strong GDP growth, improving earnings outlook, and attractive valuations—should eventually bring foreign investors back. Supported by the RBI curbs, the Indian rupee extended its winning streak against the US dollar for the second consecutive week, appreciating to close at 92.73.
Looking ahead, the outcome of the US–Iran talks in Islamabad will be the dominant market driver. A credible agreement between US-Iran would extend the oil decline, sustain the rally in metals and equities, and keep the dollar soft. A breakdown, however, would rapidly reprice supply risk, reverse risk asset gains, and send crude back toward the highs.
Follow market trends and history. Don’t speculate that this particular time will be any different. For example, a major key to investing in a specific stock or bond fund is its performance over five years.
FUTURES & OPTIONS / SECTOR WATCH
The announcement ofa two-week ceasefire between the US and Iran triggered big rally in global markets.Indian equitywitnessed a strong rally with also joining the upward momentum. The benchmark index Nifty staged a strong pullback rally over the past week, closing above the 24,000 with a gain of 5.89 percent, marking its best weekly performance since February 2021. Bank Nifty has emerged as a clear outperformer versus the broader indices over the past week, underscoring strong leadership from the banking space. The index posted a sharp weekly gain of 8.47 percent, registering its best weekly performance in the last couple of years.All sectoral indices ended the week in the green. The Nifty Realty Index led the gains, rising 13%, followed by the Nifty Capital Market Index which advanced 11.7%. The Nifty Auto Index surged 11.5%, while the Nifty Consumer Durables Index jumped over 9%. The Nifty India Defence Index also posted strong gains, rising 9.2%.In the options segment, strong Call open interest for Nifty was observed at the 24,500 level while major Put open interest was concentrated at the 24,000 level. For Bank Nifty, significant Call open interest was seen at 56,000 and 57,000 levels whereas notable Put open interest was placedat the 55,000 level. Implied volatility (IV) for Nifty’s Call options settled at 14.92% while Put options concluded at 17.03%. The India VIX,a key indicator of market volatility concluded the week at 18.85%. The Put-Call Ratio Open Interest (PCR OI) stood at 1.17 for the week. On the derivatives front, the long-short ratio of FIIs improved to 22.06% from 16.84% last Friday, indicating gradual short covering by FIIs in index futures.
Sustained buying activity along with meaningful short covering from current levels could provide the necessary momentum to push the Nifty higher in the coming week.Nifty has sustained around the 24,000 over the last three sessions after forming a broad gap on the daily chart indicating strength in the index. Looking ahead, technicals indicate the possibility of further extension in the pullback rally, with immediate upside targets placed at 24,300 and 24,500. On the downside, the 23,650–23,600 zone is expected to act as a key support level.Momentum indicators remain positive with RSI signalling strength and the index trading above the 200 EMA on the hourly chart suggesting short-term bullishness. Traders are advised to closely follow these levels and keep an eye on geopolitical developments which are currently influencing market trends.
Stocks looking good are Adani Power, Hyundai, Cummins India, Sona Comstar, NAM India and Waaree Energies.Stocks looking weakare KFintech, Infoedge, ONGC, Sun Pharma, Swiggy and Wipro.
(The author is a senior maket analyst and former vice-chairman, Andhra Pradesh State Planning Board)
