Markets may consolidate with positive bias

Indian equity markets are expected to consolidate with a positive bias in the week ahead. While global headwinds and intermittent volatility continue to weigh on sentiment, supportive domestic cues — particularly the ongoing earnings season and steady domestic inflows — are providing a cushion on the downside.

However, crude touching multi-year highs of ~$120 per barrel, rupee near record lows, and persistent FII outflows remain key near-term overhangs.

In this backdrop, stock-specific action is likely to dominate, driven by the ongoing earnings season. Key results due this week include Larsen & Toubro, Mahindra & Mahindra, Hero MotoCorp, Bajaj Auto, Lupin, Dabur, Shree Cement, Bank of Baroda and CG Power among others. Additional US-focused economic data to be released this week include S&P Global Services PMI, non-manufacturing PMI, and employment data.

Last week, equities demonstrated resilience, with the Nifty 50 closing with modest gains of +0.4% despite persistent global macro headwinds. The index traded in a broad range, with downside supported by sustained DII buying that offset FII outflows, alongside support from the ongoing earnings season.

Broader markets mirrored this resilience, as the Nifty Midcap 100 rose +0.7% and the Nifty Smallcap 100 gained +2.5%, both ending the week in positive territory. On a monthly basis, markets delivered a strong rebound, with the Nifty 50 gaining +7.5%, while the Nifty Midcap 100 and Nifty Smallcap 100 outperformed with returns of +13.6% and +18.4%, respectively.

Sectorally, Nifty Pharma was the outperformer for the week [+3.6%], benefiting from its defensive characteristics and rupee tailwind. PSU Banks were the notable laggard [-6.3%] for the week, after the RBI rejected industry requests to defer the implementation of its Expected Credit Loss (ECL) framework or soften its provisioning floors.

The ECL framework — introduced last year and effective April 1, 2027 — shifts banks from the current incurred-loss model to a forward-looking approach, requiring a minimum 5% provision on Stage 2 assets against the current 0.4%. PSBs, with lower provision buffers and a higher share of marginal credit, are disproportionately exposed relative to private peers.

The Q4 FY26 results season has been broadly steady so far. Of the 61 companies in MOFSL’s coverage universe that have reported — including 17 Nifty-50 constituents — Sales, EBITDA and PAT have grown 12%, 10% and 12% respectively, marginally ahead of estimates. Of the 61 companies, 29 have exceeded PAT estimates while 12 have missed. BFSI has been the standout, with earnings growth of ~18% led by private banks and NBFC-lending. Earnings are expected to drive stock-specific action going forward.

Crude oil at multi-year highs — Brent touching $120 per barrel intraweek — remained the dominant macro variable, simultaneously pressuring the rupee, widening the current account and lifting inflation expectations.

The rupee hit a fresh all-time low, reflecting the two-variable pressure that has persisted through April — elevated crude and persistent FII outflows exceeding Rs 69,000 crore for the month. A sustained recovery in the rupee requires either a meaningful crude pullback or credible geopolitical de-escalation — neither of which appears imminent.

Globally, the US Fed, Bank of Japan, and ECB held rates last week, delivering uniformly hawkish messages as the energy price shock has raised the threshold for rate cuts. For India, sustained dollar strength and a narrower interest rate differential limit the RBI’s room for easing even if domestic conditions evolve.

Defence and shipbuilding continue as strong structural themes. India is set to acquire Russian R-37M long-range air-to-air missiles in a $1.2 billion deal.

Recent engagements — including progress on a submarine cooperation roadmap with Germany, agreements with South Korea on shipbuilding, semiconductors and defence, and potential talks with Italy — along with the upcoming Quad ministerial meeting, underscore India’s push toward greater indigenisation, technology partnerships, and export opportunities. A robust order pipeline and improving execution are expected to keep investor focus on these areas.

The writer is Head of Research, Wealth Management, MOFSL.