The Month that was: May 2026

Indian stock markets ended the month slightly lower, with Nifty50 Index dipping by about 1.9%. A major reason for the market fall was global uncertainty, particularly related to ongoing war in West Asia. While Nifty50 Index witnessed a slight drop during the month, smallcap and midcap indices ended positive by 3.2% and 0.7% respectively. Companies in healthcare, metals, and capital goods sectors had a great month and saw their stock prices rise. Globally, the performance of various markets was mixed. Asian markets like Japan and South Korea saw large gains, while markets in Brazil and Indonesia lost ground.

Market mood was heavily influenced by global geopolitical tension and changing energy prices. A key positive takeaway was that earnings season for Q4FY26 was relatively better than expectations with mid and smallcap companies posting better earnings growth compared to Nifty50 companies. On the political front, BJP won a historic victory in the West Bengal state elections. India's CPI inflation stayed relatively steady at 3.5% in April, however, wholesale price index jumped sharply by 8.3%.The government made some big changes this month to curb further depreciation in INR by increasing  import duty  on gold from 6% to 15%. Also retail prices for petrol and diesel were increased by ₹7.5 per litre during the month. The meteorological department is predicting a weaker-than-normal monsoon this season. They warned that an "El Nino" weather pattern might develop in June and July. While foreign investors pulled about $3 billion out of the Indian market during the month, domestic investors stepped in with massive support, pouring in $8.7 billion.

Market Outlook -
Indian equity markets continue to face near term uncertainty due to the fallout of the West Asia war. While robust earnings growth, especially in midcap/smallcap segment continues to be a tailwind for the markets, global cues are expected to dominate in the near term. Over the next few months, sudden spike in wholesale prices and weak monsoon could impact the broader economy. Global issues, like the fragile US-Iran peace talks and increasing fuel prices also remain as risks to economic growth and equity market performance. Amidst near term volatility in the markets, steady growth of corporate profits, support from domestic liquidity and inexpensive valuations make Indian markets attractive from a medium to long term perspective.

Happy Investing!