Indian Benchmarks Close Marginally Higher, Led by IT; Financials Cap Gains

Indian equity benchmarks closed slightly higher on Tuesday, driven by strength in information technology stocks and select auto and FMCG counters. However, gains were capped by weakness in financials and banking majors as investors booked profits after a recent rally. The day’s session reflected cautious optimism, with global cues, inflation expectations, and the upcoming U.S. Federal Reserve decision contributing to subdued market breadth.

Markets End Flat-to-Positive

The BSE Sensex ended the day up 42.13 points, or 0.06%, at 76,582.35, while the NSE Nifty 50 closed 13.15 points higher at 23,265.60. The broader markets also reflected a mixed tone, with the Nifty Midcap 100 gaining 0.4% and the Nifty Smallcap 100 up 0.2%.

IT stocks led the charge, buoyed by a weakening rupee and optimism around client tech spending in the U.S., while financials, especially private lenders, dragged amid valuation concerns and muted growth commentary from management in recent earnings calls.

Sectoral Performance: IT Outshines, Banks Underwhelm

The Nifty IT index rose over 1.3%, with Infosys, HCLTech, and Wipro among the top gainers. Analysts attributed the rally to renewed demand outlooks in North American markets and easing recessionary fears.

"Investors are taking a fresh look at IT stocks as digital transformation continues to be a high-priority area for global firms," said Nandita Agarwal, Senior Research Analyst at Axis Securities. “The rupee's marginal depreciation also acted as a tailwind today.”

On the flip side, the Nifty Bank index slipped 0.5%, dragged down by HDFC Bank, ICICI Bank, and Axis Bank, as traders trimmed positions following last week's rally.

“Banking valuations are near cyclical highs and some degree of consolidation is not unexpected,” said Rajeev Mehta, Portfolio Manager at Aditya Birla Sun Life AMC. “Concerns over net interest margin compression and slower credit growth are tempering enthusiasm.”

Stock-Specific Action

• Infosys rose 2.1% following upbeat analyst commentary ahead of its Q1FY26 earnings.

• HCLTech gained 1.8%, riding on expectations of a deal win announcement.

• Maruti Suzuki and Tata Motors added over 1% each, helped by strong May vehicle dispatch data.

• ITC and HUL edged higher on defensive buying in FMCG stocks.

In contrast, HDFC Bank lost 0.9%, while Kotak Mahindra Bank and ICICI Bank ended 0.7% and 0.5% lower, respectively.

Global Market Sentiment Mixed

Asian markets offered little direction, with Chinese indices ending flat and Japan’s Nikkei 225 up marginally. European shares opened lower amid uncertainty over political stability in France and ongoing rate cut discussions in the eurozone.

In the U.S., investors await the Federal Reserve’s interest rate decision scheduled for June 12. With inflation moderating, markets are hoping for dovish commentary, though no rate cut is expected this week.

“Global investors are treading carefully ahead of the Fed’s policy meeting,” said Neha Saraf, Chief Economist at InCred Capital. “While the June decision might be a hold, guidance for September will be key.”

Macroeconomic Cues: Inflation, Crude, and Currency

India’s CPI inflation data, due later this week, remains a critical trigger. Analysts expect headline inflation to remain sticky around the 4.9% mark, driven by elevated food prices.

Crude oil prices continued to hover near $82 per barrel, with OPEC supply cuts and geopolitical tensions supporting the commodity. Meanwhile, the Indian rupee ended marginally lower at ₹83.57 per dollar, adding slight upside to IT sector earnings expectations.

Investor Outlook: Cautious but Constructive

Despite Tuesday’s muted session, analysts remain constructive on the medium-term trajectory of Indian equities. The recent rally has been broad-based, supported by strong domestic liquidity, institutional buying, and improving earnings visibility in several sectors.

“Markets are consolidating after a sharp run-up post-election results,” noted Karthik Ayer, Technical Strategist at Motilal Oswal Financial Services. “This is a healthy pause, not a reversal. As long as Nifty holds above 23,000, the trend remains upward.”

Technical View

On the technical front, Nifty formed a small-bodied candle on the daily chart with a long lower shadow, suggesting buying at lower levels. Analysts expect immediate support around 23,150, while resistance is seen near the 23,400–23,450 zone.

“The market might oscillate in a narrow range over the next few sessions as it digests global cues,” said Ayer. “Volatility may rise as we approach the Fed meeting and domestic inflation release.”

Indian equity markets ended Tuesday on a resilient note, with IT stocks leading the gains amid global caution and subdued financials. As investors await key macroeconomic data and the U.S. Fed's guidance, markets are likely to remain range-bound with sectoral rotation at play. While profit booking in banking stocks capped broader gains, overall sentiment remains cautiously optimistic in the near term.