August 29, 2025 | 1 Month |
1 Year |
|
Rupees per Dollar | 88.21 | 86.82 | 83.93 |
Oil (dollars per barrel) | 68.12 | 72.51 | 79.55 |
Retail inflation (CPI) | 1.55% (July) | 2.10% | 3.60% |


- India’s Q1 GDP at 7.8% was higher than expected supported by strong government spending. The 50% tariffs levied by the US on Indian exports has now taken effect and could pose a downside risk to India’s growth going forward. However, the government announced GST reforms to counter the impact of the higher US tariffs on the domestic economy
- The yield curve has been steepening over the last few months on account of demand-supply gap. The announcement of GST reforms triggered fiscal concerns among market participants and led to a rise in bond yields across all segments
- India’s July CPI inflation print fell to 1.55% owing largely to a favorable base effect, while core CPI softened to 4.1% from 4.6%. RBI, in its August policy, revised its inflation target downwards from 3.7% to 3.1% for FY2026
- We remain ‘neutral’ on the outlook for bond markets. Despite lower inflation prints and lower RBI inflation target for FY26, we expect the policy pause to continue in its upcoming RBI policy. We also expect the RBI to adjust the H2 FY2026 borrowing program to alleviate the pressure on long bonds

Index | 1 month (%) | 1 year (%) | 3 years (%) |
---|---|---|---|
NIFTY50 | -1.4 | -3.2 | 11.2 |
BSE100 | -1.6 | -4.4 | 11.9 |
NIFTY500 | -2.0 | -5.4 | 13.6 |
NIFTY Midcap100 | -2.9 | -6.0 | 21.0 |
At August 31, 2025
Nifty was down 1.4 % for the month of August 2025
- Market sentiment remained cautious amidst US tariffs on Indian goods
- Consumption oriented sectors rallied post government’s plan for GST rationalisation
- Within BSE 100 index, amongst sectors Auto/Retail outperformed while Infrastructure/Finance underperformed the broader market
Our outlook remains neutral in the short term while it remains positive in the medium term
- Tariffs and global growth/inflation challenges are likely to keep markets volatile in short term
- Earnings growth has been underwhelming during last few quarters
- Volatile foreign flows being alleviated by steady domestic flows
- The Nifty’s P/E, at 22x for FY2026E, is above its 5-year average
In the medium term, we expect certain important drivers for growth:
- Policy environment increasingly getting growth oriented supported by rate cuts (CRR, repo), tax cuts/rationalisation (income tax, GST), liquidity boost etc
- To mitigate tariff impact, India has started inking bilateral trade agreements (BTAs)
- Growth drivers in place in the form of demographic benefits, rising formalisation, manufacturing focus and digitisation, strong corporate balance sheets
- Earnings trajectory will be key monitorable over medium term
Market consensus for Nifty earnings CAGR over FY2025-FY2027 at 10%
