Where is the market headed?
The month has come to a close, and overall, it’s been a decent performance for the markets. At the start of June, few would have expected Nifty to post such strong gains, but it has surprised on the upside.
However, fresh geopolitical and trade-related concerns are resurfacing. Over the weekend, there were renewed narratives around Iran not being fully out of the picture, and tariff tensions could resurface, with no major agreements in place so far.
With the July deadline approaching, there’s a possibility of increased market turbulence in the coming weeks, which led to some softness in today’s session.
Market Overview
The Nifty ended the day with a 0.47% decline, forming a complete bearish engulfing candle on the daily chart. This pattern fully reversed Friday’s gains, signalling potential near-term weakness or indecision in the market.
Nifty Next 50
The Nifty Junior held firm, showing resilience despite broader market weakness. It rose 0.42%, bucking the trend and indicating that select mid-to-large-cap stocks outside the main index continued to attract buying interest.
Nifty Mid and Small Cap
Mid caps rose 0.68% and small caps gained 0.88%, indicating that the broader market remained strong despite the Nifty’s decline. This suggests underlying strength and investor confidence in non-index segments.
Bank Nifty
Nifty Bank also showed some weakness, closing down 0.23%, reflecting mild profit booking after its recent highs. This softness was in line with the overall cautious sentiment in the market.
GOLD
Gold, after being sharply beaten down toward the end of last week, is attempting a recovery today, trading around ₹9,600 per gram.
Advance Decline Ratio
Advance-decline trends remained moderately positive, with 314 stocks advancing and 184 declining, indicating a broadly supportive market breadth despite the underlying volatility.
Heat Maps
Private banks led the decline today, with Kotak Bank, Axis Bank, ICICI Bank, and HDFC Bank all closing lower. Meanwhile, public sector banks outperformed, with SBI gaining within the Nifty 50.
Several other heavyweights like Bharti Airtel, Reliance, Maruti, Tata Consumers, ITC, and NTPC also ended in the red, possibly reflecting FII selling pressure.
In contrast, the Nifty Next 50 showed broader strength, with Dr. Reddy’s, Torrent Pharma, Indigo, Siemens, Canara Bank, Bank of Baroda, PNB, and LIC among the top gainers. Only a handful of stocks such as Lodha, Chola Finance, and Swiggy saw mild declines.
Sectoral Overview
PSU banks led the sectoral charts, rising 2.66% for the day—a phenomenal surge. In stark contrast, private banks fell by 0.88%, signalling a possible rotation of funds from private to PSU banks, potentially driven by shifts in domestic or foreign institutional flows.
Defense stocks also rose by 0.93%, fuelled by renewed geopolitical concerns. Capital market stocks gained 0.81%, while pharma edged up 0.5%.
On the downside, real estate continued its correction, and Nifty Financial Services and Nifty Auto also ended in the red, particularly within the PSU segment.
Sector of the Day
Nifty PSU Bank Index
The PSU Bank index has staged a strong comeback, with notable contributions from Bank of Maharashtra, PNB, Bank of Baroda, Punjab & Sind Bank, and Union Bank of India leading the charge.
Story of the Day: Dollar Index vs. Nifty
The recent surge in the Nifty—from its panic low in April 2025 to a 17% rise over just a few months—coincided with a 6% fall in the Dollar Index. This inverse movement invites a deeper look into the relationship between the Dollar Index and Indian markets.
The Dollar Index (DXY) is a weighted average of the US dollar against six global currencies: the Euro (57.6% weight), Japanese Yen, British Pound, Canadian Dollar, Swedish Krona, and Swiss Franc.
Despite the global rise of currencies like the Chinese Yuan, the index composition has remained unchanged for years.
This index acts as a barometer of dollar strength in the global market. A rising DXY means the dollar is strengthening, while a falling DXY suggests weakness. It directly impacts commodities, global capital flows, and emerging market sentiment. For traders and policymakers alike, it’s a critical indicator used to evaluate monetary policies and capital allocation strategies.
Historically, there has been a mild inverse correlation between the Dollar Index and Indian equities like the Nifty. During periods of rising DXY, the Nifty has often struggled. For example:
- Between Nov 2021 and Jul 2022, the Nifty fell 14% while the DXY rose 12%.
- During the Global Financial Crisis, Nifty dropped 58% as DXY rose 12%.
- Conversely, during 2002–2008 and the 1980s, as the Dollar Index weakened, Indian markets witnessed major bull runs.
This pattern stems from capital movement. A strong dollar attracts global capital towards US assets, leading to outflows from emerging markets like India. This weakens domestic markets and adds pressure through higher import costs, impacting inflation and corporate profits. On the other hand, a weakening dollar encourages capital to flow into emerging markets, boosting indices like the Nifty.
The dollar also acts as a safe haven during geopolitical risks. Recent conflicts and global tensions have pushed some capital back to dollar assets, temporarily strengthening the index. Crude oil—being dollar-priced—is another channel of impact, as a strong dollar raises oil import costs for India, worsening trade balances.
If the Dollar Index continues to weaken and breaks below long-term support zones, it could set the stage for a powerful rally in Indian equities, much like previous historical cycles. If that scenario unfolds, the Indian market may experience a significant surge, benefiting from capital inflows, softer import bills, and favourable macro tailwinds.
What’s your view on the dollar index and its impact on Indian markets? Share your thoughts in the comments below! Thanks for reading, and if you found this blog helpful, don’t forget to SHARE it with your friends!
