Market Outlook
| September 30, 2026 | 1 Month |
1 Year |
|
| Rupees per Dollar | 95.83 | 95.17 | 88.79 |
| Oil (dollars per barrel) | 103.53 | 90.49 | 67.02 |
| Retail inflation (CPI) | 4.82% (August) | 4.45 | 2.01 |
- RBI in its October policy, hiked rates by 25 bps to 5.50% and changed the stance to calibrated tightening. FY27 CPI forecast was also revised upwards to 5.20% from 5.00% estimated in the previous policy. RBI will also continue to drain excess liquidity on account of FCNR(B) deposit accumulation.
- Crude oil prices surged crossing $100 / barrel as Geopolitical tension escalated again. Rupee also depreciated to 96.70 per dollar.
- US Fed also hiked policy rate by 25 bps bringing the target rate to 3.75% - 4.00%. Fed also noted that further rate hikes may be warranted if inflation remained above 2% target.
- Global rate hike cycle, geopolitical tensions and macroeconomic implications of EL Nino on domestic inflation will keep bond yields under pressure. We expect RBI to hike rates by another 50 bps in the second half of FY27 and the 10Y benchmark to trade in 7.15%-7.30% range.
| Index | 1 month (%) | 1 year (%) | 3 years (%) |
|---|---|---|---|
| NIFTY50 | -6.1 | -8.1 | 4.8 |
| BSE100 | -6.9 | -6.0 | 6.4 |
| NIFTY500 | -5.9 | -2.9 | 8.5 |
| NIFTY Midcap100 | -7.6 | 5.0 | 13.5 |
At September 30, 2026
Nifty was down 6.1% for the month of September 2026
- Surging crude prices and rising geopolitical tensions weighed on the sentiment leading to FII outflows
- Mid-caps underperformed large-caps. Within BSE 100 index, Infrastructure / Metals & Minerals outperformed while Technology / Finance underperformed the broader market
We maintain our positive stance over the short as well as medium term
- Increase in Inflation because of higher oil prices and weak monsoon
- High inflation should lead to higher nominal GDP growth
- Nifty earnings are showing signs of improvement
- Nifty’s FY27 P/E at 18.3x, is below 5-year average and appears reasonable
Over the medium term, we expect following drivers for growth to play out:
- Continued fiscal and monetary support and expanding Free Trade Agreements (FTAs)
- Strengthening manufacturing ecosystem through Production Linked Incentives (PLI), indigenisation and supply-chain diversification
Market consensus for Nifty earnings is at mid-teens CAGR over FY2026-28
IL/COMP/DOC/Oct/2026/810/1139
