Markets' incline to sustain, with FIIs also back in the play
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This week, equities are likely to trade with a positive bias as the Q2FY26 earnings season gathers momentum, aided by a dovish monetary backdrop, easing crude prices, resilient festive demand and foreign institutional investors (FIIs) turning buyers over the last few sessions.
Earnings season began on October 9 with TCS declaring its results. Next week, several technology and financial companies are scheduled to announce theirs, with business updates from the financial space so far being positive.
On the global front, investors have digested the US Federal Reserve’s minutes and now await the US CPI, PPI, and unemployment data for further clarity on policy direction.
In the previous week, Nifty50 ended higher amid improving global sentiment, supported by easing geopolitical tensions as Israel and Hamas agreed on the first stage of a ceasefire plan, along with signs of progress in a potential India–US trade deal. The index gained 1.6% to close at 25,285, while the Nifty Midcap 100 and Nifty Smallcap 100 rose 2.1% and 1.4%, respectively. Gains were broad-based, led by IT, pharma, banking, and realty.
Pharmaceutical stocks remained in focus after the U.S. government refrained from imposing tariffs on imported generics, easing supply-side concerns for Indian exporters. Foreign flows improved, with FIIs turning net buyers in the last three sessions (~₹3,000 crore), while domestic institutional investors (DIIs) added ~₹1,600 crore, cushioning early-week volatility.
Nifty earnings are expected to grow around 6% YoY in 2QFY26, driven by oil & gas, NBFC lending, telecom, metals, cement, capital goods, and healthcare. Domestically, India appears to be entering a new phase of structural growth, underpinned by a shift in consumption from needs-based to aspirational and experience-led spending.
As consumption momentum strengthens in Q3FY26, a meaningful revival in the private capex cycle is likely, marking the start of a broader investment upturn. Early signs are evident across power T&D, telecom, oil & gas, defence, and airlines, where capacity expansion is underway to capture emerging demand.
Banking and NBFCs reported healthy business updates, highlighting steady credit growth, stable asset quality, and improving deposit traction. Together with benign funding costs, the RBI’s reforms—clarity on regulatory overlaps, lower risk weights for MSME and housing loans, and a phased ECL migration from April 2027—reinforce earnings visibility and strengthen the sector’s medium-term outlook.
Meanwhile, auto and consumer-discretionary segments are positioned for a strong festive quarter. Navratri auto industry data indicated record passenger-vehicle retail sales, up 34% YoY, underscoring robust festive demand. September wholesales were modestly higher across two-wheeler and passenger-vehicle categories, while tractor volumes surged on the back of the best monsoon in five years (+8% above LPA). Supported by GST rate cuts and strong rural sentiment, the sector is well-placed to deliver a strong near-term performance.
We believe that the government remains committed to lifting and stimulating the Indian economy despite frosty global headwinds. Proactive policy initiatives, supported by the RBI’s accommodative stance, have already set in motion a cycle of structural growth and improving corporate profitability. These recent trade partnerships, along with the ongoing earnings season, are expected to drive market direction in the near term. We expect corporate profit growth for Nifty constituents to sustain double-digit momentum through FY27, underpinned by stable macros, policy continuity, and earnings resilience.
(The writer is Head of Research, Wealth Management, Motilal Oswal Financial Services Ltd)