Dalal Street Update - The Indian stock market ended last week on a cautious note, with the Nifty 50 closing at 24,363 and the Sensex at 79,858. Sentiment was impacted by concerns over tariffs, a weaker rupee, and mixed corporate earnings.
The coming week is likely to be influenced by several major events and developments, including the impact of the Reserve Bank of India’s latest policy decision, inflation data from India and the United States, movements in foreign investor flows, crude oil prices, ongoing corporate results, and updates on the monsoon. Each of these factors has the potential to shift market direction in the short term.
The Reserve Bank of India recently decided to keep the repo rate unchanged at 5.50 percent and maintained a neutral stance. This decision indicates confidence in the economy’s growth prospects and signals that inflation remains within manageable limits. By holding rates steady, the RBI also aims to ensure stability in the currency, especially at a time when global trade tensions and tariff-related news are creating uncertainty.
The central bank’s growth forecast for the current financial year is around 6.5 percent, and inflation is projected to remain close to 3.1 percent in the near term. Such conditions create a positive environment for businesses, particularly in sectors like banking and infrastructure, where stable interest rates help borrowing and investment.
However, the market will closely watch for any changes in the RBI’s liquidity management, as these can influence short-term interest rates and, in turn, stock market performance.
One of the most important triggers for the week will be the release of India’s Consumer Price Index (CPI) and Wholesale Price Index (WPI) inflation data for July. These figures will help investors understand whether price pressures are continuing to ease or if there are risks of a rebound.
Inflation below the Reserve Bank’s target range could strengthen expectations for future interest rate cuts later this year. Industrial Production data for June has already shown growth slowing to 1.5 percent year-on-year, suggesting that while the economy is expanding, the pace is not very strong.
Internationally, the United States will also release its inflation numbers for July. The performance of US inflation is crucial for global markets because it can influence the timing of interest rate changes by the Federal Reserve.
A higher-than-expected inflation figure in the US could lead to a stronger dollar, prompting foreign investors to withdraw money from emerging markets like India. On the other hand, a lower reading would support risk-taking in equities worldwide, including on Dalal Street.
Foreign portfolio investors were net sellers of Indian equities last week, even though they increased their investments in Indian debt markets. This pattern shows that overseas investors are being cautious about equity risk in the current environment.
The rupee has been under pressure, trading close to record lows around the 87.8 mark against the US dollar. A strong dollar typically hurts import-heavy sectors such as automobiles and consumer durables, while benefiting exporters like information technology companies.
Crude oil prices have been trading in the range of 66 to 69 US dollars per barrel. Lower oil prices are generally positive for India’s economy because they help control inflation, reduce the trade deficit, and improve the profitability of oil marketing companies. If oil remains below 70 dollars, it can provide a cushion for the market, but any sudden spike due to geopolitical tensions could reverse these gains quickly.
Although most large companies have already reported their results for the April to June quarter, the earnings season is not completely over. Last week saw positive surprises from State Bank of India, Tata Motors, Life Insurance Corporation, and BSE, which reported a strong 103 percent year-on-year jump in quarterly profit. This week, several mid- and small-cap companies, including Bata India, Ipca Laboratories, and Sansera Engineering, will announce their results.
Investors will pay special attention to commentary from companies in key sectors. In banking and finance, the focus will be on how deposit costs are moving and whether there is any rise in bad loans. In the auto sector, export demand and product mix will be closely analysed.
For consumer goods companies, the market will look for signs of recovery in rural demand and trends in raw material costs. A positive surprise in any of these areas can trigger sector-specific rallies even if the broader market remains volatile.
The Indian monsoon has been normal overall but uneven in distribution. Some parts of the country have received less rainfall than usual, while others have seen heavy downpours. The India Meteorological Department has forecast a revival of rainfall from August 14 onwards, especially in central and western regions, due to a low-pressure area forming in the Bay of Bengal. The department still expects above-normal rainfall for the August–September period.
Rainfall patterns are vital for agriculture, which in turn affects rural incomes and food inflation. Vegetables and pulses are especially sensitive to monsoon conditions. A good spell of rain in the coming weeks can boost farm output, improve rural spending power, and benefit sectors like agricultural inputs, two-wheeler sales, and fast-moving consumer goods aimed at rural buyers. On the other hand, prolonged weak rainfall in certain regions could lead to higher food prices and dampen rural demand for non-essential goods.
An added layer of uncertainty comes from trade relations and tariff developments. The United States has recently increased its trade-related pressure on India, particularly around the purchase of discounted Russian oil.
While the direct economic impact may be limited in the near term, such announcements create headline risks that can unsettle markets. Sectors such as information technology, textiles, chemicals, and metals, which have significant export exposure, may react more sharply to these developments.
If inflation data in both India and the United States meets expectations and crude oil prices stay low, there is room for a short-term market recovery from current levels. Stable policy signals from the RBI, combined with better-than-expected corporate earnings in select sectors, could support buying interest.
However, any negative surprises on inflation or sharp movements in the rupee and oil prices could keep foreign investors on the selling side, making the market vulnerable to further declines.
Stock selection will be key in the current environment. Companies with strong earnings visibility, solid balance sheets, and low dependence on imports are better placed to weather short-term volatility.
Sectors linked to rural demand may see renewed interest if the monsoon revival unfolds as predicted. The market’s reaction to global events, especially US inflation data, will also set the tone for the remainder of the week.