Market Breathes Easier: Geopolitical Easing and Q1 Earnings Fuel Rally Ahead of US Inflation Report

Market Breathes Easier: Geopolitical Easing and Q1 Earnings Fuel Rally Ahead of US Inflation Report​

The domestic equity markets concluded the week with a positive close, continuing an upward trend despite periods of consolidation. The rally was primarily supported by softening crude oil prices and improved macroeconomic sentiment within India. Nifty 50 gained 0.77 percent, settling at 24,571, while BSE Sensex rose 0.52 percent to reach 78,499.

The performance was robust across specialized segments. The Smallcap 100 index saw a significant surge of 2.73 percent, and the Nifty Midcap 100 gained 0.87 percent. This strong traction in mid and small-caps is attributed to resilient domestic fundamentals and continued stock specific catalysts throughout the quarter.

Indian Equities Close Strong Amid Fundamentals Boost​

Market participants are expected to maintain a positive bias next week, driven by the final phase of the Q1FY27 earnings season and de-escalation in geopolitical tensions. Siddhartha Khemka, Head of Research at Motilal Oswal Financial Services, stated that equities should trade positively due to resilient domestic fundamentals and continuous stock specific opportunities.

The ongoing earnings cycle provided broad support across sectors. Initial results have largely exceeded expectations, driving sustained buying interest. Furthermore, the Reserve Bank of India (RBI) reinforced investor confidence by maintaining its policy stance during the week.

Oil Price Volatility Reflects US-Iran Peace Deal Tension​

Global market sentiment remains highly focused on the developments concerning the US and Iran peace deal and the full reopening of the Strait of Hormuz, as these factors dictate oil price trajectory. Brent crude futures closed 4.98 percent lower for the week at $83.55 a barrel, following earlier volatility.

Initial optimism regarding an interim arrangement to reopen the strait saw Brent dip towards $79.4 a barrel in the first half of the week. However, this sentiment reversed when reports surfaced that Iran's parliament was reviewing a draft bill explicitly tying the full reopening to the lifting of the US maritime blockade and the cessation of naval activities.

Kaynat Chainwala of Kotak Securities highlighted the disconnect between diplomatic rhetoric and ground conditions. The recent attack on an ADNOC vessel suggests caution is warranted until there is a sustained decline in attacks and reliable restoration of tanker movements, keeping a geopolitical floor under crude prices.

Global Focus: Navigating US Inflation and Economic Indicators​

Global markets will intensely monitor US inflation figures, which are due on August 12, followed by PPI on August 13, and retail sales data on August 14. The outcome of these reports holds the key to determining the future path of Fed policy.

A softer combination of CPI and PPI would strengthen expectations for rate cuts and create upside potential for bullion. Conversely, a hotter-than-expected reading could trigger profit taking among traders. In better news, June inflation stood at 3.5 percent, down from 4.2 percent in May, with core inflation settling at 2.6 percent from 2.9 percent.

Domestic Outlook: CPI, WPI And Corporate Earnings Drive Concern​

Domestically, the focus is keenly placed on CPI and WPI inflation readings for July, releasing on August 12 and 14 respectively. These figures are vital inputs for RBI’s interest rate decision making process.

Dipanwita Mazumdar of Bank of Baroda noted that while improved arrivals of key vegetables offer comfort, food prices across essential commodities like rice, onions, and edible oils remain high. He expects core inflation to stay contained around 4.0–4.1 percent, supported by softer international gold prices but warns that higher input costs could create upside pressure.

The market is also gearing up for the final surge of corporate earnings. More than 2,000 companies will announce their June quarter results. Key names like Apollo Hospitals Enterprise and Tata Motors Passenger Vehicles are among the Nifty 50 firms expected to release their figures.

Market Participants Watch FII Flow and IPO Inflows​

Foreign Institutional Investors (FIIs) remained net buyers for the second consecutive week, purchasing nearly Rs 2,900 crore in shares, adding to a previous net purchase of Rs 5,950 crore. This inflow occurred amid subdued oil prices and easing geopolitical risks. However, their cumulative net selling stood at Rs 3.48 lakh crore year so far.

Meanwhile, Domestic Institutional Investors (DIIs) provided dual support, buying shares worth Rs 7,767 crore, bringing their total buying for the current year to Rs 5.13 lakh crore. On a related note, the Indian rupee depreciated for the second consecutive week, weakening by 0.19 percent against the US dollar and falling below its 10-week Exponential Moving Average (EMA).

Globally, focus is also shifting to IPO action. A total of nine new IPOs, including Rs 7,479 crore in the mainboard segment, are set to hit Dalal Street. Dhoot Transmission will launch a Rs 3,067-crore IPO on August 10. Shiprocket, a technology-led platform for MSMEs and retailers, is set to open its Rs 1,617.5-crore IPO on August 12.

Technical View and F&O Cues​

Technically, the Nifty 50 is anticipated to continue short term consolidation trading. The immediate hurdle remains the 24,700–24,800 zone; a decisive move above this level could open the door toward the critical 25,000 mark. On the downside, 24,500 is expected as immediate support, followed by the 24,300–24,200 zone.

The indicator readings remain constructive. The RSI rose to 54.18, and the MACD continues its bullish crossover movement, suggesting gradual trend strengthening despite short-term choppiness. According to F&O data, the 24,600 level stands as a crucial concentration point for maximum Call and Put open interest in Nifty 50.

The fear gauge, India VIX, rose 3.42 percent during the week to 12.16 from its previous low. Despite this increase, the VIX remains comfortably below the key 15 zone, signaling stable market conditions for bull buyers.