All eyes on geopolitical negotiations underway

This week, investor attention will be on key geopolitical developments, including the Russia–US talks held over the weekend, which are likely to keep equity markets range-bound. Amid lingering concerns over elevated US tariffs on Indian goods, the Indian government is set for a flurry of high-level engagements with China and Russia within a single week. The Chinese Foreign Minister will visit India on August 18 for talks under the Special Representatives (SR) mechanism, followed by the External Affairs Minister’s visit to Russia on August 21. These meetings could pave the way for a possible interaction between the Indian and Chinese Prime Ministers at the SCO Summit in Tianjin on August 31.

Adding to the optimism, news reports suggest the Indian Prime Minister may visit the US next month to attend the UN General Assembly, raising hopes of bilateral discussions. Meanwhile, the Commerce Minister has indicated that the India–U.S. trade deal could be concluded by Sep-Oct 2025.

S&P’s upgrade India’s sovereign credit rating last week after nearly 19 years, reflects expectations of policy continuity and sustained infrastructure investment, supporting long-term growth. Also, India’s retail inflation declined to an 8-year low of 1.55 per cent in July (vs 2.10 per cent in Jun’25), which improved sentiments for rate sensitive industries. 

Last week, Nifty50 ended with a gain of 268 points at 24,631 (+1.1 per cent), snapping a six-week losing streak. Sentiments improved on softer-than-expected retail inflation and optimism over Russia–US peace talks. Broader indices also advanced, with the Nifty Midcap100 and Smallcap100 up 0.9 per cent and 0.7 per cent respectively. Among sectors, pharma was the top gainer, rising 3.5 per cent on the back strong results from multiple pharma companies. Nifty Auto and PSU banks followed with gains of over 2 per cent each. Meanwhile, FMCG were the sole loser, declining marginally by 0.4 per cent. 

In the capital market segment, demat additions inched up MoM to 3m in Jul’25 (2.5m in Jun’25). IPO activity gained significant momentum with 13 IPOs in July, the highest since Sep’24. AMC stocks are likely to be in focus as the net inflow into equity mutual funds surged 81per cent to Rs 42,672 crore in July as per latest AMFI data. We expect that a stable growth trajectory for volumes and rising retail participation should support the performance of market intermediaries.

On the macro front, retail inflation fell to an eight-year low of 1.55 per cent in July (vs 2.10 per cent in June), largely driven by lower food inflation. A favourable base effect from September to December should keep inflation contained going ahead as well. This cycle is working in India’s favour at a time when inflationary pressures from tariffs dominate global discussions. The anticipated slowdown in global growth should help keep international commodity prices in check, partly offsetting the impact of higher tariffs.

The all-India cumulative rainfall as of early August was 2 per cent above the long period average (LPA). Overall, the June–Julymonsoon remains favourable, supporting farm output and rural demand.

(The writer is Head of Research, Wealth Management, Motilal Oswal Financial Services Ltd)