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In its latest outlook, Bajaj Finserv AMC believes global markets are entering a more challenging phase marked by moderating growth, elevated inflation, and heightened geopolitical uncertainty. According to the latest IMF projections, global growth is expected to slow to 3.1% in 2026 from 3.4% last year, while inflation is projected to rise to 4.4%, largely due to elevated energy prices and supply-side disruptions. Slowing global trade and tighter financial conditions are also expected to weigh on external demand and liquidity flows across emerging markets.

Equity: Domestic markets show resilience, global risk appetite improves

Against this backdrop, Indian equities have displayed resilience despite heightened volatility driven by crude oil prices and geopolitical developments. The Nifty 50 delivered returns of 7.5% over the past month, although markets witnessed sharp swings depending on movements in oil prices and geopolitical sentiment. Midcap and small-cap indices outperformed, gaining 14% and 20% respectively.

Foreign portfolio investor (FPI) outflows moderated in April 2026 to Rs 70,000 crore from nearly Rs 1.2 lakh crore in March, reflecting improving global risk appetite following easing geopolitical tensions and stronger domestic macroeconomic indicators. “Large caps have continued to act as a stabilising anchor amid volatility, while mid and small caps have seen sharper corrections and stronger rebounds. Valuations in large caps are now below long-term averages after the recent correction,” says Sorbh Gupta, Head of Equity, Bajaj Finserv AMC.

The asset management company continue to favour domestic consumption and financials, while selectively preferring capital goods companies benefiting from global power capex trends. “We remain underweight on IT services due to potential AI-led revenue deflation risks. Large-cap and flexi-cap funds are expected to remain attractive for long-term investors, while small-cap funds are better suited for disciplined SIP investing. Multi-asset, balanced advantage, and arbitrage strategies continue to offer diversification benefits in volatile conditions,” adds Gupta.

Fixed Income: Macros intact but oil prices remain key

In fixed income markets, oil prices remain the key macro variable influencing inflation, growth, and policy expectations. While India’s headline inflation remains contained for now, elevated crude prices continue to pose risks to consumption, input costs, and external balances. Growth momentum has also shown signs of moderation, with softer PMI readings, weaker core sector growth, and slowing consumer confidence.

The external sector remains under pressure amid widening trade deficits, weaker capital flows, and rupee depreciation. However, domestic liquidity conditions remain comfortable due to government spending and RBI liquidity management measures. While yields have eased from recent highs, they remain elevated compared to pre-West Asia crisis levels, particularly at the longer end of the curve.

“The RBI is likely to maintain a status quo approach as it balances slowing growth with persistent inflation and external risks. In this environment, growth moderation is expected to anchor yields, while supportive liquidity should prevent any disorderly rise in rates,” says Siddharth Chaudhary, Head of Fixed Income, Bajaj Finserv AMC.

The fund house believes the broader macro framework remains intact. “Growth is slowing, inflation risks persist, and external pressures are elevated. However, liquidity conditions remain supportive, policy remains stable, and India’s financial system is significantly more resilient than during previous oil shocks. From a portfolio perspective, this continues to argue for a balanced and measured duration stance. In this environment, fixed income remains crucial, both as a carry asset and as a stabilizer in portfolios,” concludes Chaudhary

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