Market Outlook
| May 31, 2026 | 1 Month |
1 Year |
|
| Rupees per Dollar | 95.00 | 94.92 | 85.58 |
| Oil (dollars per barrel) | 92.05 | 114.01 | 64.15 |
| Retail inflation (CPI) | 3.48% (April) | 3.40% | 3.34% |
- Continued geopolitical tensions has aggravated the supply side shock resulting in some of the emerging markets raising their policy rates to contain rising inflationary pressures.
- India headline WPI in Apr’26 surged to a 42 month high of 8.30% driven by a sharp rise in fuel and power, while CPI for the same month rose moderately to 3.48%. However, with the recent hikes in petrol and gas prices, CPI is expected to follow the upward trajectory.
- While RBI in its upcoming policy may revise its FY2027 CPI forecast further upwards (from 4.60% projected earlier), we expect RBI to keep the policy rate unchanged at 5.25% in June with a hawkish commentary.
- We continue to expect bond yields to remain under pressure as rate hike expectations build up due to inflationary pressures emanating from geopolitical uncertainties. We expect 10Y benchmark to trade in 6.90%-7.15% range.
| Index | 1 month (%) | 1 year (%) | 3 years (%) |
|---|---|---|---|
| NIFTY50 | -1.9 | -4.9 | 8.3 |
| BSE100 | -1.3 | -3.4 | 9.8 |
| NIFTY500 | -0.5 | -0.6 | 12.8 |
| NIFTY Midcap100 | 3.2 | 7.5 | 22.3 |
At May 31, 2026
Nifty was down 1.9 % for the month of May 2026
- US-Iran deal overhang, currency and AI led narrative continues to keep the market rangebound
- Mid and small cap out-performed large-cap. Within BSE 100 index, amongst sectors Cement / Metals & Minerals outperformed while Oil & Gas / Retail underperformed the broader market
We maintain our positive stance in the short term as well as in the medium term
- Earnings are tracking in line with expectations of recovery in current fiscal year
- FIIs selling continues which is getting absorbed by steady domestic flows
- The Nifty’s one year forward FY27 P/E at 19x, is in line with 5-year average and appears reasonable
- Prolonged Middle East conflict could lead to higher inflation, current account deficit and commodity prices
In the medium term, we expect certain important drivers for growth:
- India’s growth outlook is supported by twin policy easing to support domestic demand
- The government’s focus on building a resilient economy through energy security, trade deals and policy reforms with the aim to enhance the business environment and attract foreign investment.
Market consensus for Nifty earnings CAGR over FY2026-28 at 15%
COMP/DOC/Jun/2026/46/0364
