Equities likely to move sideways this week

Indian equities are likely to remain sideways with a cautious undertone in week amid persistent global volatility, with domestic growth indicators and sectoral momentum offering underlying support. Institutional flows and macro developments will be key determinants of near-term direction. In this backdrop, we recommend a calibrated shift toward domestic-facing sectors with stronger earnings visibility and relatively lower exposure to AI-related disruption. Financials, insurance, FMCG and healthcare appear comparatively resilient, even as selective cyclical themes linked to capex and industrial demand continue to offer opportunity.

On the macro front, key global releases next week include US S&P Global Manufacturing PMI, Eurozone CPI, China PMI and US unemployment data. On the macro front, key global data releases next week include the US S&P Global Manufacturing PMI, Eurozone Consumer Price Index, China Purchasing Managers’ Index and US unemployment data. On the domestic front, monthly automobile sales numbers will be announced, where demand momentum across most segments continues to remain healthy. With improving retail traction and an expected wholesales push in the fourth quarter, inventory levels at original equipment manufacturers are likely to stay lean, which should gradually reduce discounting intensity in the coming months and support margins.

On the domestic front, India’s Q3 FY26 GDP, released on February 27 under the new FY2022–23 base year series, came around 7.8%, indicating resilient and broad-based economic growth supported by steady domestic demand and improved sectoral momentum.

Recent global diplomatic developments also remain in focus. During PM Modi’s visit to Israel, the two nations signed 17 agreements across defence, AI, agriculture, cyber cooperation and digital payments, while reaffirming collaboration on innovation and regional connectivity initiatives such as IMEC. Meanwhile, Canadian PM’s visit to India signalled efforts to reset bilateral ties, with discussions centred on advancing a Comprehensive Economic Partnership Agreement and expanding cooperation across energy, AI and defence.

The uncertainty around the US’s next course of action and its implications for energy stability and regional risk sentiment are likely to keep participation measured. Markets are likely to remain sensitive to further developments, particularly given their implications for energy stability and regional risk sentiment.

Benchmark indices remained relatively stable through February. However, . The Nifty declined 2% over this week, while the Midcap100 and Smallcap100 extended losses, each falling over 1.2%. Sectoral performance reflected broad-based strength, with Metals (+3.3%), PSU Banks (+3.3%), Energy (+2.6%) and Pharma (+2.3%) emerged as key gainers. In contrast, Nifty IT was the major dragger in, declining sharply (-5%) amid continued concerns around AI-driven disruption and its implications for traditional outsourcing-led growth models. The debate within IT is increasingly shifting toward how value within the technology stack is redistributed rather than whether AI poses an existential risk.

After nearly seven consecutive months of selling amounting to over Rs 2.25 lakh crore in the cash segment, FIIs have turned marginal net buyers in February. While the inflows remain modest relative to prior outflows, the directional shift is noteworthy. Stabilising global bond yields and improved risk-reward in select large-cap segments appear to be aiding sentiment. However, sustainability of flows will depend on crude price trends, geopolitical developments and global liquidity conditions.

The broader capex cycle remains supportive, with Centre and state spending rising over 14% YoY in 9MFY26 and projected near 7% of GDP in FY27, sustaining infrastructure momentum and steady order inflows across transmission, renewables and railways, alongside a gradual private capex revival. Capital goods continue to benefit from strong execution visibility and stable margins. Metals remain constructive, supported by firm base metal prices, easing global trade concerns, a softer dollar, and structural demand from electrification, renewables, grid expansion and data centre investments.

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