Market Commentary
Equity
April was characterized by rising geopolitical tensions in West Asia, particularly US–Iran developments and continued risks around the Strait of Hormuz, which kept energy markets tight and risk sentiment volatile. Brent crude remained elevated as ceasefire hopes proved fragile. Despite this the Nifty 50, after four consecutive months of decline, bounced back smartly in April 26 with a 7.5% gain with Power, Real Estate and Capital Goods being the top sectoral gainers. Broader markets outperformed headline indices on improving earnings visibility and valuations, with midcaps rising 12.6% in April. IT underperformed sharply after weak earnings and guidance. FIIs sold net equities worth USD 5.9 bn in April 2026 (March 2026: Net sold USD 14.2 bn) and have cumulatively sold equity worth USD 21.7 bn in 2026 year to date. DIIs bought net equity worth USD 5.4 bn in April 2026 after record inflows (USD 15.4 bn) in March 2026. DII inflows into equities continue to be strong at USD 32.7 bn in 2026 year to date.
In the ongoing 4Q earnings season, key trends emerging are the tailwinds from GST cuts, credit pick up and broad-based growth. Aggregate Sales/EBITDA/PAT growth for 4Q at 13%/13%/14%, the highest in past 4Qs, aided majorly by improving volume growth. The domestic centric sectors reported even better revenue growth at 20% for 4Q. Mid-caps have reported superior earnings growth at 35% compared to 21%/14% for small and large-caps (ex-fin).
Following India’s sharp underperformance in FY26 and record FII outflows, a favorable base has likely been set for Indian equities. However, in the near term, the market will remain hostage to volatile developments arising from the West Asian crisis. Higher commodity prices will be a key monitorable, as a prolonged elevated level could affect India’s macro parameters and engender a tight monetary policy stance. Our portfolios broadly reflects our preference for growth visibility, structural domestic growth plays, and select global value names. We firmly believe that this is a bottom-up market, despite India witnessing both time and price corrections relative to EM peers. Our key Overweight sectors are Financials, Autos, Manufacturing & Industrials, Defence, Power and Consumer Discretionary. In contrast, we are underweight on Oil & Gas, Consumer Staples and Technology.
Fixed Income
Global geopolitical uncertainty remains elevated with Brent crude sustaining above USD 100/bbl amid disruption risk around the Strait of Hormuz. While market expectations still point towards eventual normalization of supplies, any prolonged disruption into Q1–Q2 FY27 could materially impact global supply chains, particularly across crude oil, natural gas, petrochemicals, fertilizers, sulphur, industrial chemicals and helium. India remains vulnerable given its high-energy import dependence, with INR already depreciating ~4.8% since end-February, making it one of the weaker performing EM currencies.
The macro impact of sustained crude above USD 100/bbl would likely be stagflationary in nature — lower growth alongside higher inflation. A Rs.10/litre increase in retail fuel prices can directly add ~50 bps to CPI, with indirect effects through transportation, logistics and manufacturing likely to be significantly larger. Accordingly, RBI’s FY27 CPI projections may require upward revision if elevated commodity prices persist.
Despite external headwinds, domestic high-frequency indicators remain resilient with healthy GST collections, strong PMI readings, stable credit growth and robust automobile and fuel consumption trends. Headline CPI inflation stood at 3.4% in March’26 and 3.5% in April’26, with core inflation staying at 3.4%. Core ex precious metals inched higher from 2.1% in March’26 to 2.2% in April’26. The recent uptick is driven by an increase in cigarette prices and restaurant services (due to hike in commercial LPG prices).
However going ahead, RBI’s focus is likely to remain on anchoring inflation expectations and containing currency volatility. While the bar for immediate rate hikes remains high, policy communication is expected to retain a tightening bias, with possibility of policy tightening re-emerging in H2 FY27 if imported inflation pressures sustain.From an investment perspective, we continue to maintain a conservative duration stance while selectively accumulating high-spread assets to lock in carry. Any incremental duration addition is viewed as tactical until macro visibility improves.
