Market Outlook: Trump's Steel Tariffs, RBI Interest Rate Decision, Auto Sales, and FII Inflows
The Indian markets ended the last week of May on a subdued note amid concerns over U.S. tariffs and profit-booking. Only PSU Banks and Real Estate sectors showed gains, while others faced setbacks. The GDP growth for FY25 was 6.5%, slightly above expectations.
The GDP data released after market hours on Friday indicate that GDP growth slowed to 6.5% in FY25. However, the annual figure was marginally higher than the expectation of 6.3%. Additionally, the GDP growth rate in the January-March quarter stood at 7.4% of FY24-25.
The broader markets outperformed the headline indices, with NIFTY Midcap 100 index rising by 1.2% and Smallcap 100 gaining 1.3%. Sectorally, only PSU Banks (+4.0%) and Real Estate (+1.3%) closed the week firmly in the green, while all other major indices faced profit-booking. FMCG (-2.1%) and Automobiles (-0.8%) were the top laggards.
The breadth of the NIFTY50 index further cooled, dropping from 88% to 68%. Last week, over 88% of NIFTY50 stocks were trading above their 50-day moving average (DMA). The index began the week with 88% of stocks above the 50-DMA, but this figure steadily decreased, dropping to 68% by the end of the week. This signals a broad-based consolidation.
Foreign Institutional Investors (FIIs) started the June series with a long-to-short ratio of 19:81, indicating a generally negative outlook on the index. Their net open interest in index futures is -83,000 contracts. Historically, when FIIs begin a series with a long-to-short ratio above 20:80, they rarely push it beyond 90%, which suggests limited follow-through. The heavy short positioning indicates a sideways-to-negative trend in the near term. However, a strong positive trigger could spark a sharp short-covering rally. As expiry approaches, traders should watch for shifts in open interest and the long-to-short ratio to assess changes in sentiment. To track this ratio, you can login to https://pro.upstox.com/ ➡️F&O➡️FII-DII activity➡️FII Derivatives.
FIIs neutral positioning on the index futures was in line with their cash market activity. They remained net buyers for the third month in a row and bought shares worth ₹11,773 crore. On the flip side, the DIIs sustained their buying momentum and purchased shares worth ₹67,472 crore.
The NIFTY50 index failed to cross the immediate resistance of 25,200 zone and formed a second inside candle on the weekly chart. The index traded in a narrow range of broadly 500 points throughout the week, indicating consolidation at higher levels. Meanwhile, the short-term trend of the NIFTY50 index remains range-bound with immediate resistance around 25,200 and support around 24,350. A breakout of this range on a daily closing basis will provide further directional clues.
The NIFTY PSU Bank index extended the bullish momentum after breaking out from the falling wedge pattern and reclaiming 21-week and 50-week exponential moving averages. It is a bullish chart pattern involving two converging, downward-sloping trend lines. In this pattern, the price makes lower highs and lower lows, indicating decreasing selling pressure and the potential for an upside trend reversal. Unless the index slips below the ₹6,500, the index may sustain its bullish momentum. All the constituents of the index ended the week in green with Canara Bank, UCO Bank, and Punjab National Bank advancing in the range of 7% to 5%.
Key events in focus: All eyes will be on the Reserve Bank of India’s Monetary Policy Committee meeting, which is scheduled for Friday, 6 June 2025. The central bank is expected to announce a rate cut of 25 basis points, continuing its accommodative stance amid easing inflation. In addition, as the new month begins, market participants will focus on high-frequency data, like May's auto sales figures. On the global front, the jobs report on Friday will highlight insight into hiring. Experts believe the May jobs report is expected to show an increase of 1,30,000 jobs, which would represent a slowdown from the 1,77,000 jobs created the previous month.
Spotlight: Ahead of the RBI’s policy meeting, focus will remain on BANK NIFTY, as the index consolidates near record highs of around 55,750. With retail inflation consistently below the RBI’s target of 4%, a rate cut of 25 basis points in June is almost certain, marking the third such cut this year. Combined with recent tax cuts, this could further boost demand and strengthen the ongoing capital expenditure (capex) cycle, supporting momentum in banking stocks.
Oil: Crude oil prices remained under pressure and ended the week lower, with West Texas Intermediate (WTI) closing below last week’s doji. On Saturday, OPEC+ announced a fresh supply hike of 4,11,000 barrels per day for July, sticking to its strategy of reclaiming market share and pressuring over-producers. OPEC+, which accounts for about half of global oil output—including allies like Russia—is adding supply that’s weighing on prices and squeezing producers, particularly key non-OPEC rivals.
Takeaway: In our last week's blog, we highlighted that the NIFTY50 index is likely to sustain its range-bound trend after a sharp momentum. The index failed to breach the key resistance zone of 25,200 and support of 24,350 and remained confined within this range. For the coming week, traders can monitor these key levels. A break above or below these levels on a closing basis will provide further clues.
Frequently Asked Questions
What was the GDP growth for FY25?
The GDP growth for FY25 was 6.5%, which was slightly higher than the expectation of 6.3%.
Which sectors showed gains during the last week of May?
PSU Banks (+4.0%) and Real Estate (+1.3%) were the only sectors that showed gains during the last week of May.
What is the expected outcome of the RBI’s Monetary Policy Committee meeting?
The RBI’s Monetary Policy Committee is expected to announce a rate cut of 25 basis points, continuing its accommodative stance amid easing inflation.
What is the current trend of the NIFTY50 index?
The NIFTY50 index remains range-bound with immediate resistance around 25,200 and support around 24,350. A breakout of this range on a daily closing basis will provide further directional clues.
What impact did OPEC+’s supply hike have on crude oil prices?
OPEC+’s supply hike of 4,11,000 barrels per day for July has put additional pressure on crude oil prices, causing them to drop.
Related News Articles
India's Booming Fractional Ownership Market: A $5 Billion Opportunity by 2030
Mumbai and Delhi NCR emerge as top hotspots for asset acquisition opportunities under the SM REIT umbrella
Stable RBI Stance Boosts Real Estate Sector and Homebuyers
The RBI's decision to keep the repo rate unchanged at 6.5% for the ninth consecutive time has been welcomed by property developers, who believe it will create a stable environment for the real estate sector.
Garuda Construction IPO Surpasses Subscription Target, Attracts 1.91 Times Bids
Garuda Construction and Engineering's initial public offer (IPO) has been fully subscribed, with a 1.91 times oversubscription on the first day. The share sale received bids for 3,80,15,666 shares against 1,99,04,862 shares on offer.
Real Estate Stocks Gain Ground in Early Trading Session
Real Estate stocks were trading positively, with the BSE Realty index rising by 66.46 points or 0.81% to 8288.1 at 09:44 IST.
Andheri: The Commercial Real Estate Goldmine of Mumbai
In the bustling heart of Mumbai, Andheri stands out as a prime commercial real estate hub. With a blend of modern developments and strategic connectivity, it has become a sought-after location for businesses and investors alike.
Bollywood Singer Anu Malik Sells Two Apartments in Mumbai for ₹15 Crore
Mumbai real estate market update: Anu Malik's sale reflects a broader trend of Bollywood celebrities selling high-value properties in tinsel town.