Healthy macros may hold markets steady

Indian equities, this week, are likely to hold firm supported by healthy domestic macros, improving demand outlook for Q3 and resilient flows. Any progress on the India-US trade talks would be a key near term catalyst for the markets. Markets will track key global data calendar this week, including US Q3 GDP, Producer Price Index, Consumer Confidence data and retail sales.

Last week, markets opened strong on the back of NDA’s Bihar victory and optimism around trade negotiations between US and India, but later retreated after failing to break its all-time high of 26,277, and ended at 26,068 with gains of +0.6%. Even weak India’s Composite Purchasing Managers' Index (PMI) data, which slipped to 59.9 in November from 60.4 in October, dampened the sentiment. While large caps are witnessing buying interest, broader markets saw selling pressure with Midcap100 down -0.7% while Smallcap100 fell -2.2%. Sectoral performance was broadly muted, with most segments facing pressure, while IT and auto showed some resilience.

Globally, sentiment softened as investors weighed strong corporate earnings from Nvidia against uneven macro trends. The US jobs report added to the uncertainty, with payroll additions of 119,000 exceeding expectations of 55,000 even as unemployment rose to 4.4%, reducing market confidence in December Fed rate cut probability. Thus, the Indian rupee slid to a new all-time low against the U.S. dollar amid weak risk appetite. The currency reached 88.83, breaching its previous record of 88.80 touched in late September and earlier this month.

Corporate results for 2QFY26 came to an end and marked the strongest earnings performance in five quarters, driven by broad-based strength across oil & gas, metals, NBFCs, cement, capital goods and telecom. Midcaps and smallcaps once again outpaced large caps in earnings growth, while the weakness within the large-cap universe was primarily due to subdued results from Private Banks and Automobiles. We expect this gap to narrow, as large caps appear well-positioned for earnings rebound with NIMs stabilising for banks and early signs of renewed momentum in auto names.

Meanwhile, the electronics/EMS sector saw some positive developments at the 8th Electronic Summit, wherein emphasis was laid on deeper backward integration, favourable policy discussions, and rising exports, with ECMS approvals for 24 projects worth Rs 7,100 crore reinforcing the sector’s long-term opportunity.

Overall, domestic fundamentals, improving FII flows and progress on the India–US trade pact keep the broader market outlook positive, even as global headwinds may drive short-term swings. We view current volatility as an opportunity to accumulate high-quality, high-earnings-growth names with a medium- to long-term horizon.

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