Invest Guide April 2026

Download Digital Version

Dear Investors,

Dear Investors, Q4FY26 marked a transition from domestic strength to global-led volatility. The quarter began on a positive note with strong GST collections, improving PMI trends and a capex focused Union Budget supporting growth. Trade progress with the US and EU further strengthened sentiment, while inflation remained within the RBI’s comfort range. However, March saw a sharp reversal as Middle East tensions drove crude prices higher, leading to currency pressure and FII outflows. Despite resilient domestic fundamentals, external factors particularly oil and capital flows began to drive markets, increasing near-term caution and volatility.

GDP Led Strength -

Domestic Fundamentals Remain Resilient

India's GDP growth remained resilient at 7.8% in Q3FY26, moderating slightly from 8.4% in Q2FY26 but improving from 7.4% in Q3FY25, reflecting sustained economic momentum. For the full year, FY26 growth is estimated at 7.6%, higher than 7.1% in FY25, supported by stable macro fundamentals. Nominal GDP is expected to grow at 8.6%. Looking ahead, the Economic Survey has revised FY27 growth upwards to 7-7.4%, indicating continued strength in India’s growth trajectory.

GST Collections -

Sustained Fiscal Strength Reflects Economic Resilience

Fiscal and economic indicators remained supportive during the quarter. GST collections were robust, with January 2026 at ₹1.93 lakh crore (up 6.2% YoY) and February at ₹1.61 lakh crore (up 7.9% YoY), reflecting strong compliance and formalisation. Business activity also stayed expansionary through most of the period, with solid momentum in January and February before moderating in March. This early strength reassured markets that domestic demand and tax buoyancy remained resilient despite global uncertainties.

Supportive Monetary Policy and Benign Inflation Backdrop -

Monetary conditions remained supportive during the early part of the quarter. The Reserve Bank of India held the repo rate steady at 5.25% in February, maintaining a neutral stance amid a balanced growth-inflation outlook. Inflation remained benign, with CPI at 2.75% in January and 3.21% in February, well within the 2–6% band and below the 4% target retained for five years. This reinforced expectations of stable and supportive monetary policy despite external uncertainties.

Union Budget 2026 Reinforces Investment-Led Growth Strategy -

The Union Budget 2026-27 provided a strong domestic anchor, emphasizing growth and policy continuity. Public capital expenditure was increased to ₹12.2 lakh crore alongside a continued focus on fiscal discipline. The government outlined key initiatives across manufacturing, infrastructure, semiconductors, biopharma, and digital infrastructure, including programs like Biopharma SHAKTI and Semiconductor Mission 2.0. The overall takeaway for markets was a clear commitment to investment-led growth and private sector participation rather than short-term populist measures.

AI Disruption: Near-Term Headwinds for IT Earnings -

Rapid AI advancements led by Anthropic have raised concerns for Indian IT. Automation of coding and support functions may reduce billable volumes and compress margins, while increasing investment needs. Near term earnings growth could moderate, with recovery dependent on successful transition toward AI led services and outcome-based business models.

Q4FY26 Earning Preview & Market Implication -

The ongoing US-Iran conflict is expected to weigh on corporate earnings in Q4FY26, with spillover effects into early FY27. Supply chain disruptions, particularly around the Strait of Hormuz, and potential damage to energy infrastructure may delay normalization in global oil markets. Earnings impact on the Nifty is estimated at ~1–2% for FY27E, while Small & Midcap companies could see relatively higher downgrades. However, the overall impact is likely to remain short term, spanning one to two quarters.

US-India Trade Talks Deferred Amid Tariff Uncertainty and Supreme Court Ruling -

India and the US have deferred trade talks amid uncertainty after the US Supreme Court struck down Trump’s tariff powers. The interim deal to cut tariffs from ~50% to 18% remains unclear, while new proposed global tariffs (~15%) add complexity. Both sides are pausing negotiations to reassess implications before finalising terms.

Progress in India-EU Trade Talks; India-UK Pact Remains Structural Positive -

The India-EU trade agreement advanced materially during the quarter, including broad tariff reduction commitments in draft form. On the India-UK front, there was no fresh market-moving signing event during this quarter because the India-UK CETA had already been signed in July 2025; however, it remained an important structural positive in the background, with India official reiterating it in March as part of its expanding FTA network. For markets, this meant continued medium term support for export-oriented sectors such as textiles, engineering goods, autos, alcohol beverages and other labour-intensive manufacturing segments.

Geopolitical Shock in March Shifts Market Narrative -

March marked a sharp reversal as the U.S.-Israel-Iran conflict triggered a surge in crude prices with brent above 119$ /bbl intensifying inflation, current account, and currency risks for India. The rupee weakened past 95/USD, while FII outflows exceeded $16 billion, pressuring equities and bonds. Growth forecasts were cut and inflation expectations rose. Despite government fuel duty cuts and RBI intervention to stabilise FX markets, sentiment deteriorated, with macro risks overtaking domestic growth optimism and shifting market focus toward external vulnerabilities.

Equity Market Strategy Navigating the way forward -

Indian equities continue to offer a favourable medium-term opportunity, but the market has clearly transitioned into a more volatile and earnings-driven phase. Domestic fundamentals remain strong, supported by steady GDP growth, healthy GST collections, and a sustained push on capital expenditure. However, near-term market direction is increasingly influenced by external factors such as elevated crude prices, currency movement, and persistent FII outflows amid geopolitical uncertainty. In this backdrop, a balanced approach is advisable, focusing on domestic cyclicals like banks, infrastructure, and capital goods, while selectively participating in export-oriented themes.