A police officer walks past the Reserve Bank of India (RBI) logo inside its headquarters in Mumbai.
Credit: Reuters photo
This week, Indian equities are poised to trade firm, supported by expectations of policy easing from both the RBI and the US Federal Reserve, stronger demand visibility, and steady domestic flows. Sentiment has also improved as the India–US trade agreement reportedly enters its final negotiation phase.
Market participants will closely track the RBI’s policy outcome, while global cues—particularly US jobless claims, PMI data and JOLTS job openings—may shape the near-term tone for interest-rate expectations.
Last week, Indian equities inched higher as the Nifty broke out to a record high of 26,310 after nearly 14 months of consolidation, before closing the week with a 0.6% gain. Market participation remained broad-based, with the Nifty Midcap index also scaling fresh highs, signalling sustained investor appetite beyond large caps. Large caps continued to draw inflows, while the Midcap100 declined 0.8% and the Smallcap100 fell 2.2% on a weekly basis. Sector-wise, IT led weekly gains (+1.6%), followed by Auto (+1.1%) and Private Banks (+0.7%).
Globally, risk sentiment improved as softer inflation prints and slower growth data reinforced expectations of coordinated rate cuts. Easing geopolitical tensions and more reasonable valuations further supported foreign participation, helping sustain the constructive setup. Back home, macro fundamentals remain supportive, with India’s Q2 GDP growing at 8.2%, up from 7.8% in the previous quarter—underscoring resilient consumption and broad-based economic strength.
The Union Cabinet approved a Rs 7,280-crore scheme to build a domestic supply chain for sintered Rare Earth Permanent Magnets (REPMs), targeting an annual manufacturing capacity of 6,000 metric tonnes. The move aims to cover the full value-chain — from rare-earth oxides to finished magnets — reducing import reliance and supporting key sectors including electric vehicles, renewable energy, electronics, aerospace and defence.
Domestically, structural reforms remained in focus with the rollout of India’s new Labour Codes—consolidating 29 fragmented laws into a unified framework designed to streamline compliance and expand formal workforce benefits, including for gig and fixed-term workers. While the reform strengthens India’s competitive positioning in global supply chains and improves ESG alignment, labour-intensive industries may face near-term cost adjustments before benefits fully accrue.
Sectorally, consumption trends also remained encouraging. The Nifty Auto index gained ~1.1%, with retail demand holding firm in November 2025 despite the post-festive period. Rural recovery, favourable taxation and replacement demand continue to support volumes. Auto stocks may remain in focus as companies release monthly sales updates. SUVs continue to lead passenger vehicle demand, two-wheelers are improving across entry and premium categories, commercial vehicle demand remains mixed and tractor sales reflect healthy rural sentiment.
India’s BFSI market now stands at ~Rs 105 lakh crore in market capitalisation. While banks remain dominant, their share has reduced to ~54% from ~70% in FY15 in the BFSI ecosystem, reflecting the rapid rise of insurance, capital markets platforms and digital-native financial companies. The structural broadening of the sector is expected to continue, with several scaled fintech and wealth-tech platforms yet to list.
The Nifty IT index gained ~1.6%, aided by expectations of US rate cuts. Early sector commentary suggests a cyclical recovery as AI spending moves from infrastructure build-out to deployment. Deal momentum is stabilising, discretionary budgets are normalising and visibility for a multi-year AI adoption cycle is improving. With the sector’s index weight at a decade low but profitability intact, valuations remain favourable.
Overall, the market backdrop remains constructive, supported by resilient macros, improving liquidity, and rising policy clarity. With anticipated rate cuts and the potential conclusion of the India–US trade pact acting as incremental triggers, equities may continue to trade with a gradual upward bias in the near term.
(The writer is Head of Research, Wealth Management, Motilal Oswal Financial Services Limited)