Markets Find Their Footing Again

After a rocky patch, Indian markets bounced back notably, fuelled by RBI policy cues, easing inflation, and renewed investor optimism. Do Q2 results add to the cheer?[EasyDNNnews:PaidContentStart]

After enduring its worst week in seven months, the Indian equity market regained its momentum during the last fortnight. The tide turned following the Reserve Bank of India’s monetary policy meeting, a muchawaited event that finally brought relief to investors. On the day of the policy announcement, the Nifty snapped an eight-day losing streak and soared around 1 per cent, even though the central bank decided to keep the repo rate unchanged at 5.50 per cent with a ‘neutral’ stance.

The central bank revised its inflation forecast lower and upgraded its FY26 GDP growth projection to around 6.8 per cent, citing a benign inflation environment. It also hinted that there remains policy room for future easing, a signal that cheered the markets. Adding to the optimism, India’s headline CPI inflation cooled sharply to 1.54 per cent in September, down from 2.07 per cent in August, marking the lowest reading in over eight years. The sustained moderation in food prices fuelled hopes that the inflationary cycle may have decisively turned.

The central bank revised its inflation forecast lower and upgraded its FY26 GDP growth projection to around 6.8 per cent, citing a benign inflation environment. It also hinted that there remains policy room for future easing, a signal that cheered the markets. Adding to the optimism, India’s headline CPI inflation cooled sharply to 1.54 per cent in September, down from 2.07 per cent in August, marking the lowest reading in over eight years. The sustained moderation in food prices fuelled hopes that the inflationary cycle may have decisively turned.

Cooling inflation bolstered hopes of future rate cuts, driving renewed risk appetite, particularly in technology stocks. Optimism also stemmed from expectations that major IT companies could post stronger-than-expected September quarter results, aided by better growth guidance and a healthy deal pipeline. Banking and financial services counters mirrored this positivity, supported by firm credit growth, lower inflation, and a pick-up in festive season loan demand. In contrast, auto stocks witnessed mild profit booking after a stellar run in recent months. On the primary market front, two marquee IPOs, LG Electronics India and Tata Capital, kept Dalal Street buzzing.

LG Electronics India had a blockbuster debut with shares soaring 50 per cent, while Tata Capital listed flat with marginal gains. In terms of flows, FIIs remained net sellers, withdrawing about ₹5,400 crore during the fortnight, though the outflow was notably lower than in prior periods. Domestic institutional investors (DIIs), on the other hand, remained steadfast, pumping over ₹21,000 crore into equities. With the Q2FY26 earnings season underway, all eyes are now on corporate results to gauge whether this newfound optimism can sustain the rally ahead. Stay tuned for further updates!

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