Markets poised to rise amid favourable circumstances

Nifty ended the previous week on a flat note after a volatile series of sessions, though the sharp surge on Friday reaffirmed strength in the prevailing uptrend.

The Indian benchmark indices, Nifty50 and Sensex, scaled fresh all-time highs for the second consecutive week but failed to hold those levels, ending the week largely unchanged. Nifty50 briefly touched a record peak of 26,325.80, and Sensex climbed to 86,159.02, before closing at 26,186.45 and 85,712.37 respectively.

The muted weekly close reflected a tug-of-war between supportive macro triggers and offsetting headwinds, resulting in range-bound movement without any decisive directional bias. And those were not without reasons.

One has to keep in mind that a key highlight of the week was the RBI’s 25 bps repo rate cut, taking the policy rate down to 5.25 per cent. This marked the fourth rate reduction of 2025, totaling 125 bps of easing since February.

Positive sentiment was further reinforced by India’s strong Q2 GDP print that released last week, encouraging progress on the US–India trade agreement, and rising expectations of a US interest rate cut, all of which helped stabilize the market.

On the flip side, the domestic currency dipped below 90 level against the US dollar, raising concerns over inflation and forex-related risks for companies.

Persistent foreign institutional investor (FII) selling continues to weigh. Sectorally, performance remained mixed. The consumer durables and capital goods indices were the biggest laggards, slipping 3.19 per cent and 2 per cent respectively.

In contrast, the IT index outperformed, advancing nearly 3.5 per cent, supported by global rate-cut optimism. In the similar manner, the time to come will be driven by another important development-the recently concluded Indo-Russian deal. India and Russia are targeting a $100 billion trade relationship by 2030, an increase from $68 billion in FY25, fuelled by India's growing exports in key sectors.

This partnership may enhance capital flows through Russian investments in Indian infrastructure and securities using surplus rupees, helping to address trade imbalances. Sectors such as defence, pharmaceuticals, marine products, IT-BPM, healthcare, education, engineering, textiles, and jewellery stand to gain from streamlined approvals and improved market access, potentially stabilising India's trade deficit and attracting FDI.

Interestingly, Rupee-Ruble transactions are progressing to reduce dollar dependence, with the RBI facilitating quicker payments through Special Rupee Vostro Accounts for oil and other trades. This approach minimises foreign exchange volatility by lowering conversion costs and mitigating exchange risks, along with reducing transaction delays due to SWIFT restrictions.

Indian companies benefit from decreased trade-financing expenses as direct settlements eliminate intermediary fees. However, trade imbalances mean Russia is accumulating rupees, leading to discussions on reinvestment, which supports gradual local currency growth.

Strengthened Energy and Raw-Material Cooperation

Strengthened India-Russia partnerships in energy and raw materials, including discounted crude oil, fertilisers, and critical minerals such as lithium, to enhance supply reliability.

This arrangement secures over one-third of India’s oil imports, providing a buffer against global price fluctuations.

Industries like refining, petrochemicals, agriculture, and manufacturing benefit from lower input costs due to affordable Russian Urals crude and fertilisers. Investments in Russian energy fields guarantee long-term access, supporting energy security without the need for expensive refinery overhauls. How all these factors eventually play out in the market that remains to be seen. Watch this space.