After extending gains for a second consecutive week, the Indian equity markets have turned cautiously constructive, supported by easing geopolitical tensions and an improvement in overall risk appetite. However, the near-term outlook remains delicately balanced, with global cues and external developments likely to steer direction in the coming sessions.

Going into the week, market sentiment is expected to be driven by geopolitical developments, the trajectory of crude oil prices, the ongoing corporate earnings season, and sustained institutional inflows. Any escalation in West Asia or renewed volatility in global crude markets could quickly disrupt the current risk-reward balance and trigger bouts of volatility.

In the previous week, the benchmark indices extended their upward momentum, with both the Nifty and the Sensex rising over 1% each to close at 24,353.55 and 78,493.54, respectively. Sentiment remained supported by easing geopolitical concerns and improving global risk appetite, with optimism around a potential US–Iran peace framework further bolstering confidence.

The broader markets continued to outperform the frontline indices, underscoring widening participation across segments. The midcap index surged around 3.5%, while the smallcap index jumped 4.3%, reflecting a clear pickup in risk appetite and broader market strength.

Here are five key factors that will set the tone for the market this week:

Developments in West Asia

Geopolitical cues will remain the most immediate trigger for market direction. Although a temporary ceasefire between the US and Iran has eased tensions, the situation remains fragile. Key sticking points such as Iran’s uranium enrichment programme and the reopening of the Strait of Hormuz continue to pose risks.

The markets appear to be pricing in a relatively swift normalisation, but any setback in negotiations or escalation could quickly dent sentiment and trigger volatility across global equities.

“Global developments remained a key influence, with easing tensions between the US and Iran and expectations of a potential peace agreement supporting investor sentiment. However, lingering uncertainty around the geopolitical situation continued to keep markets sensitive to movements in energy prices and global risk cues,” said Ajit Mishra – SVP, Research, Religare Broking.

Trend in crude oil prices

Oil prices have cooled from recent highs but remain elevated at around $90 per barrel, significantly above pre-conflict levels. Given India’s dependence on crude imports, sustained high prices could pressure inflation, the rupee, and fiscal dynamics.

On the flip side, any further softening in crude could act as a tailwind for equities, especially for sectors sensitive to input costs such as paints, aviation, and FMCG.

On Monday, international benchmark Brent crude for June delivery rose 5.8% to around $95.6 in early trade, as markets reacted to renewed geopolitical tensions between the US and Iran. The surge came amid fears of a fresh escalation after attacks on commercial vessels in the Strait of Hormuz raised concerns over a potential widening of the conflict.

FII flow trajectory

Foreign institutional investor (FII) activity will be closely watched after signs of stabilisation emerged last week. FIIs turned net buyers in the final three trading sessions of the week, lending support to the rally, though flows remained marginally negative on a weekly basis at around ₹250 crore.

In contrast, domestic institutional investors, who had been consistent supporters of the market, turned net sellers in the latter part of the week, largely reflecting profit-taking at higher levels. Weekly DII outflows stood at around ₹6,300 crore.

On a month-to-date basis, FIIs have withdrawn around ₹39,220 crore from Indian equities, while DIIs have infused approximately ₹29,690 crore during the same period.

“Looking ahead, institutional activity is expected to be driven by a mix of global and domestic factors, with developments in US–Iran negotiations remaining a key monitorable due to their potential impact on geopolitical stability and global energy markets—any progress or setbacks could trigger volatility in crude oil prices,” said Pabitro Mukherjee, Associate Vice President- Research, Bajaj Broking.

Corporate earnings

The trajectory of quarterly corporate earnings is set to play a pivotal role in shaping investor sentiment in the coming sessions. Over the weekend, key banking heavyweights such as HDFC Bank and ICICI Bank announced their Q4 results, which are likely to be absorbed into market pricing this week.

Looking ahead, a number of large-cap companies—including HCL Technologies, Infosys, Tech Mahindra, Havells, IndusInd Bank, M&M Finance, and Shriram Finance—are scheduled to report their earnings, keeping the focus firmly on the ongoing results season.

Beyond the headline numbers, investors will closely track management commentary on margins, demand trends, and FY27 guidance. These forward-looking cues are expected to be crucial in influencing sectoral performance as well as the broader market direction.

Technical outlook

From a technical perspective, the market has maintained a positive bias, supported by consistent higher highs and higher lows. Broader markets - midcaps and smallcaps - have outperformed, indicating improved risk appetite and wider participation.

The Nifty 50 is currently trading in the 24,300–24,400 zone, continuing its recovery and holding just above its 50-day EMA, which signals an improvement in short-term sentiment, says Ponmudi R, CEO of Enrich Money.

According to him, the 24,400 level continues to act as an immediate resistance zone. A sustained breakout above this mark will be key to extending the uptrend towards the 24,800–25,000 range. On the downside, immediate support is placed at the psychological 24,000 level, followed by a stronger base near 23,800, which is expected to act as a significant demand zone.

Bank Nifty is trading with a cautious undertone, consolidating in the 56,500–56,700 range after its recent recovery. The index continues to face supply pressure at higher levels, limiting follow-through on the upside, he said.

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