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Market Outlook

India Equities last month Indian equities extended their gains in Jul'26, with the Nifty50 rising 2.2% MoM to close at 24,384, crossing the 24,000 mark for the first time in five months. Broader markets continued to outperform, with the Nifty Smallcap 100 gaining 2.5% and the Nifty Midcap 100 advancing 1.8%, supported by better-than-expected earnings and resilient domestic fundamentals. Nifty50 trades at ~19x one-year forward P/E, 10% below its longterm average, while several heavyweight sectors, including Private Banks, Consumer, Technology and Retail, remain below historical valuation averages.

Q1FY26 Earnings Preview

The 1QFY27 earnings season has started on a stronger-than-expected note. Among the 211 companies in the MOFSL Universe that had reported results by 31st Jul'26, aggregate earnings grew 2% YoY, significantly ahead of our expectation of a 10% decline. Excluding OMCs, underlying earnings growth remained robust at 17% YoY, led by BFSI (+20% YoY), Metals (+53% YoY), Technology (+11% YoY) and Automobiles (+7% YoY). The 39 Nifty companies that have reported so far delivered 11% YoY earnings growth, comfortably ahead of expectations.

Improving Domestic Macros

India's macro backdrop remained supportive during the month. Industrial production (IIP) accelerated to 7.3% YoY in June, led by strong manufacturing and power output, while GST collections rose 15.4% YoY to ?2.11 lakh crore in July, reflecting healthy demand across industrial and capital goods segments. The RBI maintained the repo rate at 5.25% for 4th consecutive policy meeting while retaining its neutral stance. The central bank marginally raised its FY27 GDP growth forecast to 6.7% and lowered its inflation projection to 5.0%, indicating increasing confidence in India's macro stability. El Niño remains a monitorable. However, IMD's forecast of 94% of the LPA for Aug–Sep should help narrow the rainfall deficit.

Market Outlook

Looking ahead, resilient domestic macros, stronger-than-expected earnings and reasonable valuations, reinforce our positive outlook for FY27. As markets become increasingly earnings-driven, we continue to favour a bottom-up investment approach, with preference for Diversified Financials, Automobiles, Healthcare, Consumer Discretionary and select New-age Technology companies.

Key Risks & Catalysts

Upside Catalysts Lower crude oil prices (Below USD 70)

Subdued retail inflation.

India-US trade deal finalization

FII flow reversal into India

Key Risks

Prolonged geopolitical conflict escalation

Elevated Commodity / crude oil price spike

Global growth slowdown impacting exports

Weak Monsoon

Portfolio Disclosure

Market Risks

Key equity market risks that can affect the model portfolio include changes in:

• Market volatility, General market conditions

• Trading volumes/liquidity and settlement periods

• Interest rates, Rate of inflation

• Domestic and/or global political, economic and financial developments

• Policies and/or legal and regulatory frameworks by government and other appropriate authorities

Portfolio Risks

Key portfolio level risks that can affect the model portfolio include changes in:

• High exposure to specific sectors or industries can increase volatility and risk if adverse conditions affect those sectors disproportionately.

• Individual stocks within the portfolio may experience price volatility due to company-specific events such as earnings results, management changes, regulatory actions, or competitive developments.

• Certain stocks in the model portfolio may have limited liquidity, which could affect the ability to enter or exit positions without materially impacting the market price.

• The portfolio construction relies on models and assumptions that may not accurately predict future market movements. Any errors or limitations in data, inputs, or modeling techniques could impact portfolio performance.

Determination of Benchmark index

• As the portfolio has a significant exposure to Large and Mid caps, the comparable index has been determined as Nifty 200.

• The model portfolio’s performance may differ from that of the benchmark index due to differences in holdings, timing, and weighting decisions.

Rebalancing and Implementation Risks

• Differences in execution timing, transaction costs, and client-specific constraints may cause actual returns to deviate from the model portfolio’s theoretical performance.

Past Performance Disclaimer

• Past performance should not be relied upon as a guarantee of future results. The returns shown are model portfolio returns and do not represent actual trading.

• The returns shown are pre-expense but includes dividend. Actual results may differ due to transaction costs, timing, or other factors.

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