Market Outlook
| August 31, 2026 | 1 Month |
1 Year |
|
| Rupees per Dollar | 95.17 | 95.17 | 88.21 |
| Oil (dollars per barrel) | 90.49 | 90.12 | 68.12 |
| Retail inflation (CPI) | 4.45% (August) | 4.38 | 1.62 |
- RBI kept the policy rates unchanged at 5.25% in August and maintained a neutral stance. However, the RBI MPC minutes indicated a more hawkish stance raising expectations of rate hikes. Growth remained resilient as Apr – Jun ’26 GDP came in at 7.80% vs 7.30% expected, while August CPI inched higher to 5.45%, making the case stronger for earlier than expected rate hikes.
- Geopolitical tension rose as US-Iran war picked up momentum once again. Crude oil prices remained under pressure as it firmed up above $90 / barrel. Rupee also remained under pressure trading above 95 per dollar.
- Early-closure of RBI’s concessional swap window, higher crude oil price and a hawkish RBI minutes will drive interest rates higher. We expect RBI to hike rates by 50 bps in the second half of FY27 and the 10Y benchmark to trade in in 6.85%-7.10% range.
| Index | 1 month (%) | 1 year (%) | 3 years (%) |
|---|---|---|---|
| NIFTY50 | -1.2 | -1.4 | 7.7 |
| BSE100 | -0.9 | 1.0 | 9.3 |
| NIFTY500 | -0.04 | 4.4 | 11.5 |
| NIFTY Midcap100 | 2.1 | 15.2 | 18.0 |
At August 31, 2026
Nifty was down 1.2% for the month of August 2026
- Surging crude prices and rising geopolitical tensions weighed on sentiment
- Mid- and small-caps continued to outperform large-caps. Within BSE 100 index, Retail / Capital Goods outperformed while Infrastructure / Telecom underperformed the broader market
We maintain our positive stance over the short as well as medium term
- Earnings are tracking in line with expectations of decent recovery
- FII flows remained positive for second consecutive month while DII flows remain steady
- However, a sub-par south-west monsoon with intensifying El Nino and elevated energy prices may reinforce inflation and commodity-price pressures
- Nifty’s FY27 P/E at 19.3x, in line with 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
COMP/DOC/Sep/2026/79/0978
