The Month that was: January 2026

Indian equity markets ended the month with losses, underperforming global peers. The Nifty50 index declined by 3.1%, while broader markets faced steeper corrections, with mid-cap and small-cap indices falling 3.4% and 4.7%, respectively. Sectoral performance was largely negative, with Realty, FMCG, and Consumer Durables emerging as the key laggards. Globally, markets ended mixed, led by strong gains in South Korea, Brazil, and Taiwan, highlighting India’s relative underperformance during the month.
Investor sentiment was dampened by escalating geopolitical tensions following US military action in Venezuela, renewed concerns over potential US tariffs, and a depreciating rupee. However, key positive developments included the conclusion of a free trade agreement between India and the European Union and the IMF revising India’s FY2026 GDP growth forecast upward to 7.3%. The US Federal Reserve kept the Federal Funds rate unchanged within the 3.5-3.75% range. On the flows front, Foreign Portfolio Investor (FPIs) sold US$ 3.7 billion, while Domestic Institutional Investors (DIIs) bought US$ 7.6 billion during the month.

Market Outlook: 
Early February has brought good news for Indian equity markets in terms of a growth oriented Union Budget and conclusion of India-USA trade deal. The back to back trade deal with the EU and USA should give significant impetus to India's export engine which has fallen behind over the last 1 year. In the near term, Indian equity markets may navigate volatility stemming from global geopolitical tensions and currency fluctuations. However, a confluence of positive factors such as trade agreements with large economies, upward revisions in GDP growth forecasts by the IMF/NSO, and better-than-expected corporate earnings provide a strong domestic foundation for Indian equity markets to move up. These structural tailwinds, combined with robust industrial growth, position the market well for a strong performance over the medium term.

Happy Investing!
 

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