Between Caution and Conviction

Domestic equities, after enduring a spell of heightened volatility in recent weeks, traded within a narrow range over the past fortnight as persistent concerns over India-U.S. tariff tensions kept investor sentiment subdued. The Nifty VIX, a key gauge of market volatility, inched up by 2-3 per cent, signalling expectations of relatively muted fluctuations in the near term. With limited triggers for growth and a low-volatility outlook, benchmark indices reflected a sluggish tone.[EasyDNNnews:PaidContentStart]

The BSE Sensex was largely unchanged, while the Nifty 50 managed a modest gain of 0.27 per cent. Echoing the underwhelming sentiment, the broader market weakened as the BSE Mid-Cap Index fell 0.39 per cent, while the BSE Small-Cap Index fared worse with 1.5 per cent decline over the fortnight. On the sectoral front, movements largely remained confined within a narrow 2-3 per cent range.

Auto and metal stocks managed to outperform, while FMCG and real estate sectors came under noticeable selling pressure. India Inc’s Q1FY26 performance painted a muted picture, with aggregate revenue growth of just 6 per cent and operating profit expanding by 10-11 per cent. Notably, only about 55 per cent of companies managed to report positive profit growth. Despite the markets’ lacklustre performance in recent weeks, investor sentiment remains far from pessimistic.

Mutual fund SIP inflows surged to a record ₹28,464 crore in July, underscoring the strong conviction in India’s long-term growth story. While foreign institutional investors (FIIs) extended their selling streak, pulling out nearly ₹20,800 crore, the resilience of domestic institutional investors (DIIs) provided a critical counterbalance, with inflows exceeding ₹52,000 crore during the period. India’s retail inflation eased further in July, slipping to 1.55 per cent, its lowest level in eight years and well below analysts’ projections.

The sharp moderation was largely driven by a significant correction in food prices, offering relief to consumers and policymakers alike. India’s foreign exchange reserves climbed to USD 693.62 billion for the week ending August 8, moving closer to their all-time high. The Indian government has unveiled plans for the most significant tax overhaul since 2017, proposing a sweeping reform of the Goods and Services Tax (GST). Once approved, the changes are expected to take effect from October, potentially lowering product prices. Consumer goods, auto, and insurance companies are poised to be among the biggest beneficiaries, with improved demand prospects and margin gains likely to follow. With macro fundamentals strengthening and select sectors showing promise, the focus now shifts to tracking market movements closely to capitalize on emerging opportunities. Stay tuned!

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