From U.S. tariffs to macro data: 5 factors that may impact the Indian share market this week

The Indian equities market witnessed a sharp rally last week and managed to end with decent gains, as easing geopolitical concerns and renewed interest from foreign institutional investors (FIIs) lifted investor sentiment. After starting the week on a weak note, the indices witnessed steady traction in the latter half of the week, with buying momentum gaining traction on Thursday and Friday, led by a sustained rally in banking stocks.

The BSE benchmark Sensex surged 1,650.73 points, or 2%, to end at 84,058.90 during the week ended June 27, and the NSE Nifty climbed 525.4 points, or 2%, to settle at 25,637.80. In the past four sessions, the Sensex added 2,162 points, while the Nifty50 jumped 2.7%, propelling the overall market capitalisation of BSE-listed firms to ₹460 lakh crore.

Here are five factors that will drive the Indian share market this week:

Geopolitical tensions

Easing tensions in the Middle East following a ceasefire between Israel and Iran will have a positive impact on the global equities, including India. This would boost investors’ appetite for riskier assets, prompting them to reallocate funds from safer assets like gold or U.S. Treasuries to equities.

Adding to it, crude oil prices, the barometer of global stability, are likely to come down further amid easing geopolitical tensions, affecting energy stocks and broader inflation expectations.

Foreign funds flow

Triggered by the ceasefire between Israel and Iran and the decline in the U.S. dollar, FIIs infused money into Indian equities. They invested ₹8,915 crore into Indian equities so far this June, including buying through the exchange and primary market and others category.

“FIIs were buyers in financials, capital goods and realty stocks and were sellers in FMCG, consumer durables and IT. FII buying has imparted strength to large-caps helping the Nifty and Sensex to scale new highs for 2025,” said V.K. Vijayakumar, Chief Investment Strategist, Geojit Investments.

In the debt market, FIIs continued selling and this trend is likely to continue given the low yield differential between U.S. and Indian bonds, he added.

U.S. tariff developments

As the July 9 deadline for the 90-day pause on U.S. reciprocal tariffs approaches, the heightened risk of renewed duties could dampen investor sentiment, elevate inflation expectations, and spur market volatility.

In an interaction with Fox News Channel's Sunday Morning Futures, US President Donald Trump said that he does not plan to extend the 90-day pause on tariffs beyond the July 9 deadline.

Last week, White House Press Secretary Karoline Leavitt told reporters that these deadlines are “not critical” and could be extended, though the final decision lies with the President.

Macro data

A slew of macroeconomic data will be announced on the domestic as well as global fronts, which will have a direct impact on investor sentiment. The week will start with the release of industrial production data for May on Monday, followed by the manufacturing PMI for June on July 1. This will be followed by the services PMI data on July 3.

“Domestically, high-frequency data such as IIP and PMI figures will be in focus, along with monsoon progress and FII activity, to gauge short-term market trends,” said Ajit Mishra, SVP, Research, Religare Broking Limited.

Global cues will remain the dominant force, with a focus on geopolitical tensions between Iran and Israel, U.S. economic data, and commentary from Federal Reserve officials. Any signs of easing U.S. inflation or a dovish tone from the Fed may further fuel the rally, he added.

Technical outlook

The Nifty index is expected to maintain overall positive bias and head towards 25,900-26,000 levels in the coming week, being the measuring implication of the last week's range (25,200-24,500), according to Bajaj Broking Research. 

“The current rally is corroborated by positive market breadth, characterised by broad-based sectoral participation, which adds further credibility to the ongoing uptrend. The upper band of the recent consolidation range 25,100-25,200 is likely to reverse its role and act as key support in coming weeks,” it said.

For Bank Nifty, the structure in the index remain firmly bullish as it is seen sustaining above the 20-day Exponential Moving Average (EMA) since April—a key indicator of persistent upward momentum. Given the recent breakout from the consolidation zone of 56,000–53,500, the implied pattern target projects an upside potential towards 58,000-58,500 over the coming sessions, said Bajaj Broking. On the downside, the key support base has been recalibrated to the 56,000–55,500 region, which marks a confluence of technical factors—namely, the 20-day EMA and the recent swing lows of last week.

Strategy ahead

With the Nifty approaching the upper boundary of its consolidation range, the focus should remain on sector-specific leadership and identifying stocks that are showing relative strength within those sectors. A breakout above 25,200 may trigger fresh buying; however, traders should be cautious of false breakouts, especially amid heightened volatility due to the monthly expiry, said Ajit Mishra of Religare Broking Limited.

He advised a stock-specific trading strategy, with preference given to sectors showing relative strength such as banking, auto, realty, and IT. Meanwhile, traders should avoid aggressive positions in FMCG, energy, and the mid-cap and small-cap segments until there are clear signs of renewed buying interest, Mishra said.

(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)