RBI policy, FII action among 7 factors to impact D-Street this week

Markets closed the week on a cautious note, extending their consolidation phase for the second straight week. The subdued sentiment was driven by persistent global trade tensions and anticipation around key domestic policy announcements.

Benchmark indices—the Sensex and the Nifty—experienced sharp swings during the week before ending in the red, as investor sentiment was weighed down by uncertainty over U.S. tariff developments and the upcoming monetary policy decision by the Reserve Bank of India (RBI).

By the end of the week, the Nifty closed at 24,750.70, while the Sensex settled at 81,451.01.

The Nifty remained volatile with a slightly negative bias on the first day of the June series. On the smaller time frame, the index has formed a bearish moving average crossover. The RSI on the hourly chart indicates bearish price momentum, suggesting short-term weakness. Additionally, signs of exhaustion are visible on the daily RSI, accompanied by a strong negative divergence.

“However, Nifty has been struggling to move beyond a certain level. Immediate support is placed at 24,700; a breach below this level could lead to a decline towards 24,500. On the higher side, 24,800 is likely to act as a crucial resistance, as call writers have built significant positions at that level,” said Rupak De, Senior Technical Analyst at LKP Securities.

Factors that are likely to impact movement when markets reopen this week:

1. RBI Monetary Policy Committee

Looking ahead, all eyes will be on the outcome of the RBI’s Monetary Policy Committee (MPC) meeting scheduled for June 6. The central bank’s stance on the rate trajectory, especially amid mixed macroeconomic signals, will be critical in shaping market direction.

2. Auto sales number

With the new month beginning, participants will track high-frequency data including auto sales numbers and other economic indicators.

3. FII activity

The trend in foreign institutional investor (FII) flows will also be closely monitored. On Friday, foreign institutional investors (FIIs) were net sellers at Rs 6,449.74 crore, while the domestic institutional investors (DIIs) were net buyers at Rs 9,095.91 crore.

4. Technical factors

After spending the last two weeks in a consolidation phase, the Nifty is expected to soon make a directional move. Holding above the 20-day exponential moving average (20-DEMA), currently around 24,600, will be essential to maintain a positive tone. A decisive breach of this level could trigger further profit-booking, dragging the index down toward the 24,200 mark. Conversely, a strong close above 25,200 could rekindle bullish momentum and open the path toward the 25,600+ zone.

“We continue to believe that the banking index holds the key to unlocking market momentum. It has been trading within a narrow range for over a month while sustaining above its short-term support at 55,000 (20-DEMA). A breakout above 56,000 could act as a catalyst, propelling the index toward the 57,500 level,” said Ajit Mishra, SVP of Research at Religare Broking.

5. Global markets

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

6. Crude movement

U.S. crude futures fell more than $1 a barrel on Friday on expectations OPEC+ will decide on Saturday to boost oil output for July beyond previous forecasts.

Brent crude futures were down by 34 cents, or 0.53%, at $63.79 a barrel by 1643 GMT. U.S. West Texas Intermediate crude was last down 73 cents, or 1.2%, at $60.21 a barrel, having earlier dropped more than $1 a barrel.

7. INR movement

Rupee traded weak by 8 paise at 85.52 as the dollar index gained 0.25% to 99.46. Domestic capital markets remained flat and range-bound, reflecting mixed sentiment on FII flows.

“The rupee is expected to stay volatile in the 85.00 to 85.90 range. All eyes are now on the crucial RBI monetary policy decision, which will be closely watched by market participants for further direction,” said Jateen Trivedi, VP Research Analyst – Commodity and Currency at LKP Securities.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)