Here's what to expect from the Indian stock market this week: Key things investors should know

The Indian equities market concluded the week on a subdued note, marking the second consecutive week of consolidation, as sentiment was dented by volatility in the global markets due to slow progress in trade negotiations between the U.S. and its trade partners, fund outflows by foreign investors, and caution ahead of key GDP data.

However, expectations of a normal monsoon, the Reserve Bank of India’s record dividend payout, and U.S. court rulings on President Donald Trump’s tariffs provided some respite to the market.

The larger indices, the BSE Sensex and the NSE Nifty, ended marginally lower, while the BSE Midcap and the BSE Smallcap indices showed some resilience and settled in positive terrain.

The 30-share Sensex concluded the week with a marginal loss of 270 points, or 0.33%, at 81,451, with the benchmark index ending in the red in three of the five sessions in the week, in the absence of any fresh trigger. In a similar trend, the Nifty50 slid 102 points, or 0.4%, to slip below the crucial mark of 25,000 to 24,751.

Among the broader markets, both the mid-cap and the small-cap indices managed to register gains of nearly 1.5% each despite the choppy trading environment.

On the sectoral front, capital goods and realty indices were the top performers. While the realty index continued its up move for the third straight week, banking and energy also settled in positive terrain. On the other hand, FMCG, auto, and metal stocks emerged as the top laggards.

Key triggers for the market this week

This week, all eyes will be on the outcome of the RBI’s Monetary Policy Committee (MPC) meeting scheduled for June 6. The market is expecting the central bank to cut interest rates for a third consecutive time to boost economic growth. With inflation remaining below the 4% threshold limit, the RBI has ample room to cut rates by even 50 basis points, say experts.

“Going into next week, the markets will look forward to the RBI's MPC meet. With the inflation trajectory staying well under control, there exists room for RBI to prioritise growth. The performance of the Q4FY25 results season remained mixed with aggregate earnings growth of the Nifty50 Index at 3.8% YoY so far,” said Shrikant Chouhan, Head Equity Research, Kotak Securities.

Ajit Mishra, SVP-Research, Religare Broking, said the central bank’s stance on the rate trajectory, especially amid mixed macroeconomic signals, will be critical in shaping market direction.

Additionally, with the new month beginning, participants will track high-frequency data, including auto sales numbers and other economic indicators. Updates on the progress of the monsoon and the trend in foreign institutional investor (FII) flows will also be closely monitored, he said.

Globally, developments in the U.S. bond market and any updates regarding ongoing trade negotiations will continue to influence investor sentiment, said Mishra of Religare Broking.

The trend of foreign flows is also going to be critical for the domestic market. FIIs, who were continuous sellers in India in the first three months of this year, turned net buyers in April with a buy figure of ₹4,243 crore. In May, FIIs bought equity worth ₹18,082 crore through the exchanges, according to NSDL data.

“Global macros like a declining dollar, slowing U.S. and Chinese economies, and domestic macros like high GDP growth and declining inflation and interest rates are the factors driving FII inflows into India,” said V.K. Vijayakumar, Chief Investment Strategist, Geojit Investments.

He pointed out that FIIs have been buyers in autos, components, telecom, and financials in the first half of May. India’s better-than-expected GDP growth in Q4FY25 at 7.4% is an indicator that growth is rebounding, and this can lead to a revival of corporate earnings in FY26. “FIIs are likely to continue their investment in India. However, at higher levels. they might sell since valuations are getting stretched," he added.

Nifty Outlook

After spending the last two weeks in a consolidation phase, the Nifty is expected to make a directional move soon. Holding above the 20-day exponential moving average (20-DEMA), currently around 24,600, will be essential to maintain a positive tone, said an analyst at Religare Broking.

“A decisive breach of this level could trigger further profit-booking, dragging the index down towards the 24,200-mark. Conversely, a strong close above 25,200 could rekindle bullish momentum and open the path towards the 25,600+ zone,” said Mishra of Religare Broking.

Overall, he maintains a constructive view on the markets and recommends looking for buying opportunities unless the Nifty decisively breaks below the 24,600-mark. Within sectors, banking and financial services remain the brokerage's top picks, while FMCG and IT are expected to trade subdued. With the broader market showing resilience, investors should continue focusing on fundamentally strong stocks that offer a favorable risk-to-reward ratio.

“Staying agile and informed amid evolving macroeconomic and policy developments will be crucial for navigating the near-term market landscape,” he added.