Indian equities are expected to remain in consolidation mode this week amid continued global trade uncertainty and a subdued start to the Q1FY26 earnings season. Market volatility may persist, driven by stock-specific reactions to quarterly earnings announcements.
Global market sentiment remains cautious after US President announced plans to impose 30% tariff on imports from the European Union and Mexico, effective from August 1.
Investor focus will be on key macroeconomic indicators—commentary from US Federal Reserve, manufacturing and services PMI of US and India and ECB interest rate decision, alongside developments in the India–US trade negotiations.
A packed Q1 earnings calendar featuring key companies across sectors such as Ultratech Cement, Eternal, Infosys, Bajaj Finance, Nestle, and Cipla—will be crucial in guiding market direction. Additionally, markets on Monday will react to the Q1 results of banking heavyweights HDFC Bank and ICICI Bank, released over the weekend.
Reports suggest that India and the US are “very close” to an agreement, with US tariffs likely to be capped below 20%. Meanwhile, India and the UK are expected to formalise the Free Trade Agreement (agreed on 6th May’25) by this week.
On the domestic macro front, CPI inflation softened to 2.1% in June (below our forecast of 2.8% and market consensus of 2.6%) from 5.1% in June 2024 and 2.8% in May 2025. The inflation outlook remains favourable. The WPI inflation eased to a 21-month low of -0.1% in June, marking its first contraction in 19 months.
Last week, Nifty50 ended with a loss of 0.7% at 24,968, marking its third straight weekly decline amid continued global trade uncertainty and a subdued start to the Q1FY26 earnings season. Broader markets outperformed, with Nifty Midcap100 and Smallcap100 gaining 0.8% and 1.0% respectively. Rate-sensitive sectors including PSU Banks, realty and auto ended with gains as a 77-month low retail inflation in June5 reignited hopes of further interest rate cuts by RBI. In contrast, IT and private banking indices were under significant pressure, following weaker than expected earnings by multiple IT companies and Axis Bank.
Pharma and healthcare stood out as relative outperformers last week, with mid-cap pharma names witnessing a bounce. With export outlook improving and regulatory risks receding, the pharma space could remain in favour, especially among defensive investors amid global uncertainties.
Consumer-focused sectors including consumer discretionary stocks saw renewed interest, supported by softer-than-expected inflation data for Jun’25. This raised hopes of an RBI policy shift towards monetary easing, driving interest in rate-sensitive names. Meanwhile consumer sentiment was further boosted by stable demand trends and festive season stocking. These sectors are well-positioned to benefit from a domestic recovery narrative if macroeconomic tailwinds persist.
(The writer is Head of Research, Wealth Management, Motilal Oswal Financial Services Ltd)