June was a month of contrasts. Large caps barely moved while small and micro caps rallied hard. The RBI stayed on hold but rolled out a wave of measures to shore up the rupee. Oil went from crisis to calm and back to uneasy within four weeks. And two sectors, defence and data centres, had breakout months that had little to do with the geopolitical noise dominating headlines.

This month we cover five stories: June’s lopsided rally across market caps, the RBI’s playbook for supporting liquidity and the rupee, how oil swung from a geopolitical premium to a sharp fall and back to caution, defence’s move from event-driven spikes to sustained order flow, and the data centre investments reshaping India’s infrastructure landscape.

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Markets Last Month 🔦

1. Large Caps Lag, Small Caps Lead: June’s Lopsided Rally

Indian equities closed June in positive territory, but the gains were far from even. The Nifty 50 ended the month up 1.4%, and the Sensex gained 2.3%. Further down the market, the moves were sharper: the Nifty Smallcap 100 rose 4%, and the Nifty Microcap 250 gained 6.4%. Midcaps sat in between, with the Nifty Midcap 100 up just 0.12%.

The year-to-date picture shows the same split, magnified. The Nifty 50 is still down 8.7% for the year, and the Sensex is down 10.3%. Midcaps, by contrast, are up 2.2% year-to-date, and smallcaps are up 6.5%. Over the last three months specifically, mid and smallcaps have gained more ground than large caps.

Sector performance told its own story. IT was June’s weakest sector by far. The Nifty IT index fell 9.6% during the month and is now down close to 31% for the year, its worst stretch in recent memory. Concerns about AI reducing demand for traditional IT services, a nearly 19% drop in Accenture’s stock after it cut its guidance, and continued selling by foreign investors all weighed on the sector. Realty was the biggest gainer, with the Nifty Realty index up 6%, helped by strong office leasing, rising demand for data centre space, and a broader shift toward sectors driven by domestic demand. Bank stocks also did well, with Nifty Bank up 6.1% after the RBI left interest rates unchanged.

India VIX, a gauge of how much volatility investors expect in the market over the next month, fell about 16% in June. It is still up nearly 44% for the year, which tells us that while anxiety has eased, it hasn’t gone away.

Foreign investors kept selling. They pulled ₹49,430 crore out of Indian equities during the month.

The turning point for markets came on June 12, when the US called off planned strikes on Iran and crude oil began falling sharply from close to $87 a barrel toward $70. That single move, the easing of the geopolitical risk that had been pushing up energy prices since the start of the month, was enough to turn what looked like a difficult June into a modestly positive one. Geopolitics remains the biggest swing factor for Indian markets right now, and it’s a factor India has no control over.

2. Holding Rates, Moving Markets: The RBI’s June Playbook

As expected, the RBI left the repo rate unchanged at its June 6 policy meeting. The economic data backed that decision: India’s GDP grew 7.8% in the fourth quarter of FY26, taking full-year growth to 7.7%.

Alongside the rate decision, the RBI rolled out several measures aimed at improving liquidity, drawing in foreign capital, and supporting the rupee.

The first is a dollar-rupee swap facility, which lets banks temporarily exchange US dollars for rupees with the RBI on favourable terms. This makes it easier for banks to access rupee funding while pulling in foreign money. The RBI expects the scheme to attract roughly ₹1,000 to ₹2,000 crore of inflows and ease pressure on the rupee.

The bigger move targets FCNR(B) deposits, which are foreign currency fixed deposits that non-resident Indians place with Indian banks. Banks that raise these deposits usually have to pay for currency-risk protection. The RBI lowered that cost, making it cheaper for banks to raise money from overseas. Several banks passed the benefit on by raising the interest rates they offer on these deposits. HDFC Bank, Axis Bank, ICICI Bank, and Bank of Baroda moved rates to around 6%. AU Small Finance Bank offered 7.1%, as did Bandhan Bank and Punjab National Bank. Karur Vysya Bank raised its US dollar deposit rate to 7%.

On June 24, the RBI announced a further round of measures, relaxing certain foreign exchange rules and simplifying norms for the Trade Receivables Discounting System, a platform that lets banks and financiers buy invoices from small businesses waiting on payments from larger buyers. This helps small businesses get paid faster.

3. When Oil Stopped Being the Story, Then Became It Again

As the conflict between Iran and US-Israel forces intensified in early June, crude oil traded above $91 a barrel. Markets feared continued disruption to shipping through the Strait of Hormuz, a key route for global oil supply, which would push prices even higher. India felt the impact directly: public-sector oil companies raised domestic LPG cylinder prices by ₹29 to cover higher import costs.

Things improved by the middle of the month. On June 12, the US called off planned strikes on Iran, easing fears of a wider war. Days later, on June 16, the US and Iran announced a peace agreement, and the Strait of Hormuz reopened to normal shipping traffic. As supply fears faded, crude prices fell sharply, with Brent crude dropping to around $80 a barrel before easing further to levels last seen in early March.

India’s energy supply began returning to normal too. On June 19, the country resumed importing oil from Iraq via the Strait of Hormuz, and tankers from the Shipping Corporation of India completed their first voyage on that route since the conflict began, an early sign that supply was stabilising.

The government used the crisis as a prompt to strengthen India’s energy security, asking ONGC to build a 1.75 million-tonne strategic petroleum reserve in Mangaluru, essentially a large emergency stockpile of crude oil that can be tapped if global supply is disrupted again in the future.

By the end of June, fresh reports of tanker attacks and renewed exchanges between the US and Iran in the Strait of Hormuz were a reminder that the region remains volatile, and that oil markets could turn again with little warning.

4. Guns, Orders, and Outperformance: Indian Defence’s Breakout Month

Markets actively re-rated the Indian defence sector in June, even as the broader market stayed in negative territory for much of the month. The Nifty India Defence index gained over 3% during June, while the Defence Picks Theme smallcase returned around 12% over the same period.

The re-rating was driven by concrete order flow, not just sentiment. HAL disclosed an order book of ₹2.54 lakh crore, with an additional ₹90,000 crore in the pipeline, and announced ₹12,000 crore in planned strategic investments by 2030. Data Patterns secured ₹1,121 crore in new orders, a 216% increase from a year earlier, across radar and electronic warfare systems, and its stock has rallied more than 8% since the end of May. Bharat Electronics secured a ₹1,081 crore defence order in the final week of June.

These numbers suggest India’s defence sector has moved past the announcement stage of its indigenisation push into actual contracting. The sector has now built enough momentum in orders, government mandates, and earnings that it no longer needs a geopolitical crisis to justify its valuations.

5. Servers Before Offices: India’s Data Centre Moment

June brought a rapid string of data centre announcements, at a scale that would have seemed unlikely even two years ago.

AirTrunk, the data centre platform backed by Blackstone and CPPIB, made the largest single commitment: plans to invest over $30 billion in Indian data centre capacity by 2030. L&T announced an ₹18,600 crore investment in Tamil Nadu spanning data centres, electronics manufacturing, and shipbuilding, with the data centre portion alone expected to create 8,200 jobs. Reliance Industries and Meta announced a partnership to build a 168-MW facility in Gujarat, backed by nearly 1 GW of renewable energy, which will be India’s first data centre dedicated to AI. AdaniConnex, part of the Adani Enterprises group, acquired full ownership of Madhuvanti Build Estate for ₹765 crore to expand its data centre real estate portfolio.

The Jio Platforms IPO filing in the last week of June brought the data centre theme into public markets directly. The offer targets $3.8 billion, with a significant share earmarked for AI infrastructure, 5G networks, and satellite systems.

The scale of investment reflects a simple reality: the global AI boom needs far more physical infrastructure than currently exists, and India offers land, power access, engineering talent, and policy support at a price point few markets can match. Global companies expanding their technology operations in Indian cities are adding to immediate demand, and domestic digital consumption, already large, is growing faster than the infrastructure built to support it.

On the regulatory side, the RBI introduced new lending norms for banks financing REITs and InvITs (listed trusts that let investors put money into real estate and infrastructure assets), effective October 1, 2026. Banks can now only lend to SEBI-registered, listed trusts, and at least 80% of a trust’s underlying assets must have been generating cash flow for over a year before it qualifies for bank financing. A cap has also been set limiting any single trust’s combined bank exposure to 49% of its gross asset value.

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Video: Global Investing for Indian Portfolios: A Practical Framework

Investing in the US market has become very popular in India today, driven by the AI boom, the desire for geographical diversification, and the rupee’s depreciation against the US dollar. Despite this, international diversification remains an afterthought for most Indian retail investors. They usually consider this when the portfolio is large enough, or when there’s a specific foreign expense on the horizon. This conversation between Satya Sontanam from Zerodha Varsity and Lovai Navlakhi from International Money Matters directly challenges that thought process.

The discussion covers how much to allocate internationally and why; where to look beyond the US despite the practical routes available to Indian investors — feeder funds, ETFs, direct brokers, and the GIFT City route; and how currency risk should factor into the decision. The conversation also covers the critical US inheritance tax trap for non-residents and why fund domicile matters more than most investors realise.

The key takeaway is that international exposure is a structural hedge, not a speculative bet, and the earlier it’s built into a portfolio, the better it works.

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_{The content in these posts/articles is for informational and educational purposes only and should not be construed as professional financial advice and nor to be construed as an offer to buy /sell or the solicitation of an offer to buy/sell any security or financial products.Users must make their own investment decisions based on their specific investment objective and financial position and using such independent advisors as they believe necessary.}

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