Market Outlook
| December 31, 2025 | 1 Month |
1 Year |
|
| Rupees per Dollar | 89.88 | 89.46 | 85.61 |
| Oil (dollars per barrel) | 60.85 | 63.20 | 74.64 |
| Retail inflation (CPI) | 0.71% (November) | 0.25% | 5.48% |
- The US Federal Reserve (Fed) cut the policy rate by 25 bps to 3.50–3.75% in its December 2025 policy meeting. The FOMC minutes of the December policy however, hinted a pause in the January policy unless inflation declines as anticipated.
- On the domestic front, RBI also cut repo rate in its December 2025 policy by 25 bps to 5.25% and also announced ample liquidity measures, including Open Market Operations (OMOs) to support the market. RBI also revised down its CPI inflation forecast for FY26 to 2.00% vs 2.60% earlier.
- We remain ‘neutral’ on the outlook for bond markets. We expect the 10-year yield to trade in a range of 6.45%-6.65%. The RBI Open Market Operations (OMOs), will keep the market supported across tenors with RBI purchasing longer tenor bonds also under the current Open Market Operations window.
| Index | 1 month (%) | 1 year (%) | 3 years (%) |
|---|---|---|---|
| NIFTY50 | -0.3 | 10.5 | 13.0 |
| BSE100 | -0.3 | 9.1 | 14.1 |
| NIFTY500 | -0.3 | 6.7 | 15.6 |
| NIFTY Midcap100 | -0.9 | 5.7 | 24.3 |
At December 31, 2025
Nifty was down 0.3 % for the month of December 2025
- Nifty closed CY25 near its all-time high
- Within BSE 100 index, amongst sectors Metal & Minerals / Cement outperformed while Capital Goods / Pharma & Healthcare underperformed the broader market
We continue to maintain our neutral stance on the market in the short term and positive stance in the medium term
- Overall earnings growth remains muted though there has been prominent divergence across sectors
- Tariff related uncertainty continues to remain an overhang on markets
- Markets will closely watch the upcoming Union budget for direction on growth & fiscal maths
- The Nifty’s one year forward FY27E P/E at 20x, is above its 5-year average
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
- Government’s focus on regulatory reforms with a view to simplify compliance, improve ease of doing business, attract foreign investment, boost innovation and create a more efficient & resilient economy
Market consensus for Nifty earnings CAGR over FY2025-FY2027 at 9% while FY2026-FY2028 at 16%.
COMP/DOC/Jan/2026/51/1779
