Invest Guide January 2026

Dear Investors,

Dear Investors, the third quarter of FY26 was marked by a sharp contrast between global uncertainty and India’s relative domestic stability.

While international markets grappled with trade tensions, geopolitical risks and shifting monetary expectations, India continued to demonstrate resilience, supported by strong macro fundamentals, steady policy direction and robust domestic capital flows. This divergence has become increasingly evident and reinforces our conviction in India’s long-term growth trajectory.

Macroeconomic Resilience and Growth Momentum -

India’s economy saw a strong rebound in 2025, with real GDP growth rising to 8.0% in the first half of FY25 -26, up from 6.1% a year earlier. Growth accelerated from 7.8% in Q1 to 8.2% in Q2, marking a clear recovery after moderation in FY24- 25. Nominal GDP growth also remained robust at around 9%, reflecting sustained economic momentum

RBI’s Monetary Easing -

The RBI’s Monetary Policy Committee delivered a 25 bps cut in the repo rate, bringing it down to 5.25%, while maintaining a neutral policy stance. With this move, the central bank has reduced rates by a cumulative 125 bps during CY2025, reflecting confidence in India’s inflation trajectory. CPI inflation fell sharply to multi-year lows of around 0.25% in October 2025, driven largely by a steep correction in food prices, before inching up to 0.71% in November. Inflation has remained well below the RBI’s 4% target, prompting the central bank to lower its FY26 inflation forecast to 2.0%, underscoring a prolonged phase of price stability despite global volatility.

FII & DII Activity -

FIIs were predominantly net sellers in the Indian equity market during Q3 FY26. Across October to December 2025, FIIs continued their cautious stance, with repeated net outflows attributed to global risk aversion, higher global interest rates, and portfolio reallocations away from Indian equities. FIIs recorded net selling in November, with cumulative outflows reported in the range of ~₹17,000–₹18,000 crore during the month as they trimmed positions amid global uncertainties December 2025 also showed FII as net sellers with Net Sell of `26,908 crore.

GST Developments & Rationalisation -

During Q3 FY26, GST 2.0 reforms aided economic activity through rate rationalisation and simplified tax slabs. Lower taxes on consumption goods supported demand in FMCG, durables, and manufacturing.. GST collections remained strong at over ₹1.70 lakh crore per month, indicating steady growth and continued formalisation of the economy.

Q3FY26 Earning Preview & Market Implication -

Overall, Q3 FY26 earnings are expected to remain steady with a positive domestic bias, supported by resilient consumption and sustained capex momentum. Banking and financials are likely to report healthy profit growth on the back of strong credit expansion and stable asset quality. Capital goods, infrastructure and defence companies should benefit from robust order inflows and execution momentum. Autos and select consumer discretionary stocks are expected to see volume-led recovery aided by festive demand and easing inflation.

U.S. Tariff Impact -

In Q3 FY26, increased U.S. tariffs continued to challenge certain Indian export segments, including textiles, gems & jewellery, leather and auto components, leading to margin pressure and cautious order flows. Exporters responded by improving product mix, tightening costs and expanding into alternative markets. Engineering goods, pharmaceuticals, and electronics remained relatively steady, with bilateral trade discussions offering potential upside.

Equity market strategy navigating the way forward -

India’s equity strategy is supported by strong domestic fundamentals despite global uncertainty. Healthy GDP growth, low inflation, accommodative RBI policy and GST 2.0 reforms create a positive environment for equities. Preference remains for domestic cyclicals such as large-cap banks, capital goods, infrastructure, defence and select autos, backed by capex momentum and steady consumption. Consumer staples and quality discretionary stocks benefit from rising real incomes. Export-oriented sectors exposed to tariff risks warrant caution, while IT services companies with annuity-led revenue models remain relatively resilient. Disciplined stock selection, a focus on valuations, and staggered investments remain essential amid volatile FII flows.

Wishing you all a Very Happy and prosperous New Year.