Indian equities are expected to witness a steady upmove this week, supported by strong domestic fundamentals. With the Q1FY27 earnings season gathering pace, corporate earnings are expected to be the primary driver of sector- and stock-specific action in the near term.
On the other hand, global uncertainties and geopolitical tensions in West Asia will remain key monitorable. Key events to watch this week include India’s June CPI and WPI inflation data, China’s June trade data, and the US monthly budget statement. The minutes of the US Fed’s June meeting reinforced expectations of a prolonged higher interest rate environment, which could keep sentiment towards global technology stocks subdued. Key results this week include HCLTech, L&T Finance, Federal Bank, HDFC Bank, Tech Mahindra, and Wipro.
On the macro front, the IMF marginally lowered India’s FY27 GDP growth forecast to 6.4% while raising its FY28 estimate to 6.7%, reaffirming India as the world’s fastest-growing major economy. Meanwhile, India and Australia expanded cooperation across uranium, critical minerals, green hydrogen, maritime security, and defence, strengthening long-term economic ties.
Escalating tensions in West Asia and concerns over potential disruptions to energy supplies through the Strait of Hormuz have pushed Brent crude higher to around US$76 per barrel (+5.6%) and weighed on the Indian rupee, which weakened to around Rs 95.7 per US dollar. While domestic markets have remained relatively resilient, sustained volatility in crude oil prices and currency movements could influence market sentiment going forward.
Last week, equity markets remained largely range-bound, with the Nifty50 ending flat as investors balanced supportive domestic fundamentals against global uncertainties. Broader markets continued to outperform, with the Nifty Midcap100 and Nifty Smallcap100 gaining 1% each, reflecting selective participation and sustained interest in mid- and small-cap stocks. Market volatility edged higher, with India VIX rising 4%, indicating a cautious undertone despite the market’s resilience. Sectorally, performance was mixed. Nifty Realty (+5%) emerged as the top gainer, supported by improving demand expectations, easing interest rate concerns, and continued strength in the housing market, followed by Nifty Consumer Durables (+4%), aided by resilient discretionary demand and expectations of a healthy festive season. Nifty IT (+2%) and Nifty Metal (+1%) also ended higher.
Market focus is now shifting to the Q1FY27 earnings season, which is expected to be the key near-term catalyst. We expect Nifty earnings to grow around 10% YoY in Q1FY27-the strongest quarterly growth in the past four quarters. Earnings growth is expected to be led by Financials, driven by NBFCs (+27% YoY), private banks (+10%), and PSU banks (+9%), along with Metals (+31%), Telecom (3.3x YoY), Capital Goods (+10%), Retail (+27%), and Consumer Durables (+27%).
On the IT front, TCS reported results that were broadly in line with expectations, along with encouraging management commentary for Q2, suggesting that downside risks for the IT sector remain limited despite a challenging global demand environment. Focus will now shift to results from HCLTech, Wipro, Tata Technologies, and LT Technology Services. Management commentary on deal pipelines, discretionary spending, AI-related demand, and deal wins is expected to set the tone for the sector.
Consumption demand remained healthy during Q1FY27, supported by a strong summer season and resilient rural and urban demand. While input cost pressures have started to emerge across packaging materials, glass, PET, and select agricultural commodities, the full impact is likely to be reflected only from Q2FY27. With commodity prices gradually moderating, margin trends are expected to improve during the second half of FY27.
Overall, resilient domestic macroeconomic fundamentals, healthy earnings expectations, and continued policy support are expected to underpin positive market sentiment. However, developments in West Asia, movements in crude oil prices and the rupee, and corporate management commentary during the ongoing earnings season will remain the key drivers of market direction in the near term.