Stock markets are expected to trade within a narrow range with a negative bias until crude oil prices remain elevated and clarity emerges on US-Iran peace negotiations. Experts believe that domestic equities will remain range-bound in the near term, with sentiment tilted slightly to the downside due to sustained foreign investor outflows and lingering uncertainty surrounding global economic developments.
Market Outlook and Key Drivers
With the Q4FY26 earnings season largely concluded and several broader-market companies delivering relatively stronger earnings growth, investors are likely to shift focus to stock-specific opportunities, particularly in the midcap segment. Crude prices remain high as traders assess uncertainty surrounding US-Iran ceasefire discussions and the prospects of reopening the Strait of Hormuz.
Nifty and Bank Nifty Technical View
According to Bajaj Broking, the Nifty 50 formed a bearish candle on the daily chart with a lower high and lower low, closing below the previous week's low of 23,484, indicating continuation of the downward bias. The index is likely to test the last month's low of 23,262 in the coming sessions. Only a formation of a higher high and higher low on the daily chart will signal a pause in the downtrend. On the higher side, 23,700-23,800 is expected to act as resistance, being the confluence of Monday's high and the 20-day EMA.
For the Bank Nifty, the index formed a bearish candle with a lower high and lower low, closing below last week's low of 54,116, highlighting continuation of the downward bias. The index is likely to consolidate in the range of 52,500-55,600, and only a breakout or breakdown will signal directional momentum. Key support is placed at 52,700-52,500, the confluence of the lower band of the April 8 bullish gap area and the 61.8% retracement of the previous pullback (49,955-57,456). On the higher side, key resistance is at 55,600-56,000, the confluence of last week's high and the 50-day EMA.
Macroeconomic and Corporate Developments
Indian equities are expected to remain range-bound with a marginal negative bias in the near term amid persistent Foreign Institutional Investor (FII) selling and ongoing uncertainty around global macro developments. With the Q4FY26 earnings season largely concluded and broader markets reporting stronger earnings growth, focus is likely to remain on stock-specific opportunities in the midcap space. Investors will also track the Reserve Bank of India's (RBI) June 3-5 policy meeting, while textile stocks may remain in focus following the government's cotton import duty waiver.
Domestic equities remained under pressure on Monday following weakness witnessed on Friday, with the Nifty 50 declining 0.7%, while the Midcap and Smallcap indices corrected 1.5% and 0.9% respectively. The Nifty IT index gained nearly 3%, supported by selective buying after recent underperformance. Persistent Systems (+5%) remained in focus after announcing expansion into Eastern Europe.
Foreign Institutional Investors (FIIs) recorded sharp cash market outflows on Friday, largely due to MSCI Global Standard Index rebalancing flows estimated at around Rs 20,600 crore. However, domestic institutional investors absorbed a significant portion of the selling, helping limit the extent of the decline.
The Q4FY26 earnings season concluded ahead of expectations, with the MOFSL Universe reporting 16% year-on-year profit after tax growth versus estimates of 8%, led by BFSI, metals, and oil marketing companies. Midcaps reported 36% YoY earnings growth, while the Nifty 50 posted 4% growth, marking its eighth consecutive quarter of single-digit earnings expansion. On the macro front, GST collections for May stood at Rs 1.94 lakh crore, up 3.2% YoY, though moderating from April levels.
Bond markets also remained cautious ahead of the RBI's June 3-5 MPC meeting, with the 10-year G-Sec yield rising to around 7.02%. Commercial LPG prices were raised by Rs 42-53.5 effective June 1, while CNG prices have also seen multiple hikes in recent weeks. The increase in fuel costs is expected to raise operating expenses for logistics, aviation, chemicals, and transportation sectors, keeping near-term margin pressure elevated for fuel-intensive businesses. Textile stocks may remain in focus after the government waived customs duty on cotton imports from June 1 to October 30, 2026, aimed at improving raw material availability and easing input cost pressures for the domestic textile industry, says Siddhartha Khemka, Head of Research, Wealth Management, Motilal Oswal Financial Services Ltd.
Oil Prices and Global Markets
Oil prices remained close to yesterday's elevated levels in early Tuesday trading as uncertainty surrounding US-Iran negotiations and the future of shipping through the Strait of Hormuz continued to keep traders cautious. On Monday, US President Donald Trump said discussions with Iran were still underway. However, Iran's Tasnim news agency reported that Tehran had put indirect talks with Washington on hold, adding to uncertainty over the diplomatic process.
Brent crude futures were marginally higher, gaining 6 cents to trade at $95.04 a barrel, while US West Texas Intermediate (WTI) crude slipped 17 cents to $91.99 a barrel. Both oil benchmarks had surged more than 5% in the previous session before trimming part of those gains. Sentiment improved after Trump said he had received no confirmation that Iran had suspended negotiations and also indicated that Israel had agreed to withdraw forces that were reportedly preparing for operations in southern Lebanon.
In a separate interview with CNBC, Trump suggested he would not be concerned if negotiations ultimately collapsed. However, shortly afterwards, he struck a more optimistic tone, posting on social media that talks with Iran were continuing. He later told ABC News that he expected an agreement to extend the ceasefire and facilitate the reopening of the Strait of Hormuz within the coming week, according to a post shared by the broadcaster on X.
Asian markets traded cautiously on Tuesday as lingering doubts over the durability of the Middle East ceasefire tempered investor enthusiasm generated by the latest wave of optimism surrounding artificial intelligence-related stocks. MSCI's broad Asia-Pacific index excluding Japan swung between gains and losses in early trade before slipping 0.5%. South Korean equities led the decline, falling about 2% after initially opening higher. US stock futures were also weaker, with S&P 500 e-mini futures down 0.3%, while Japan's Nikkei 225 dropped 0.7%.
According to analysts at Westpac, markets have been reacting to conflicting signals emerging from the Middle East. Iran indicated that negotiations with the United States had been suspended, only for President Donald Trump to later state that discussions were continuing and progressing quickly. Brent crude remained near the $95-a-barrel mark after Lebanon announced a limited ceasefire between Hezbollah and Israel on Monday. The development raised hopes that diplomatic efforts to resolve the three-month conflict involving the United States and Iran could regain momentum.
Oil prices had surged more than 4% in the previous session after reports suggested Tehran had halted indirect talks with Washington, adding to concerns about regional stability and energy supplies.
Asian equities moved lower after touching record levels, as investors turned cautious amid limited progress in efforts to secure a US-Iran peace agreement and paused following a strong rally driven by artificial intelligence-related stocks. US equities finished modestly higher on Monday. Investors tracked developments in negotiations between Washington and Tehran while also reacting positively to the launch of a new computer chip aimed at bringing artificial intelligence capabilities to personal computing devices. The US dollar traded in a narrow range as investors adopted a cautious stance while monitoring diplomatic developments in the Middle East. Although Lebanon announced a partial ceasefire between Hezbollah and Israel, broader geopolitical risks continued to weigh on sentiment.
