Macro and
Equity Market
Outlook
Equity Market
Outlook
GLOBAL MACRO & MARKETS
India’s NSE NIFTY 50 index ended the month of December 2025 in red
(-0.3%). Among major global indices, the Japanese NIKKEI (+0.2%), the
Morgan Stanley Capital International (MSCI) World (+0.7%) and the Euro 50
(+2.2%) ended the month of December 2025 with positive returns while
the S&P 500 (-0.1%) ended the month of December 2025 with negative
returns. Performance was mixed among Emerging Market (EM) indices,
with the Morgan Stanley Capital International Emerging Markets (MSCI
EM), Hang Seng, BOVESPA Brazil recording sequential returns of (-2.5%),
(-0.2%), and (+6.4%) respectively.
The London Metals Exchange (LME) Metals Index rose (+8.2%) in
December 2025, as global trade tensions remained volatile. West Texas
Intermediate (WTI) and Brent Crude fell MoM, by (-1.9%) and (-3.7%),
respectively, as markets remained cautious given tariff uncertainties and
geopolitical concerns.
The Dollar index fell (-1.1%), through December 2025, with the US Dollar
(USD) depreciating vis-à-vis Emerging Market (EM) currencies (+0.5%) and
appreciating against the Indian Rupee (INR) on the spot market (+0.5%).
India 10Y G-Sec yields rose by 8.20 bps, while US 10Y G-Sec yields rose by
15.38 bps, and the German Bund yield rose by 16.60 bps, with rates settling
at 6.58%, 4.16% and 2.85%, respectively.
Domestic Macro & Markets
The BSE SENSEX fell (-0.6%) in December 2025, in line with the NSE NIFTY
Index. The BSE Mid-cap index outperformed the BSE SENSEX, falling by
(-0.5%) while the BSE Small-Cap index underperformed the BSE SENSEX,
falling by (-1.0%), over the month of December 2025. Sector-wise, Metals,
Oil & Gas and Automobiles were the top outperformers over the month of
December 2025, clocking (+7.9%), (+1.8%) and (+1.3%) respectively. Six
out of BSE Sensex’s 13 major sectoral indices ended the month of
December 2025 in green.
Net Foreign Institutional Investors (FII) flows into equities were Negative
for December 2025 at( -$2.51 Bn), following (-$0.42 Bn) in November 2025.
Domestic Institutional Investors (DIIs) remained net buyers of Indian
equities for the 28th consecutive month with flows of +$8.10 Bn in
December 2025 compared to (+$8.67 Bn) November 2025.
India's high frequency data update:
Record levels of Goods and Services (GST) collections, stable retail inflation,
deflated input inflation, rising core sector outputs, and elevated credit
growth augurs well for the Indian economy.
Purchasing Managers’ Index Manufacturing PMI:
India’s Purchasing Managers’ Index Manufacturing (PMI) in December 2025
fell to 55.0 from 56.6 in November 2025, continuing to remain in the
expansion zone (>50) for the 51st straight month. The figure remained well
above the long-term average (LTA), signalling continued strength in the
sector. However, the latest reading reflects softer new order inflows amidst
challenging market conditions with momentum easing across new business
orders.
Goods and Services Tax (GST) Collection:
Gross collections of INR 1.75 Tn (+6.1% YoY) in December 2025 concluded
the forty fifth consecutive month of collections over the INR 1.4 Tn mark.
The moderate growth validates the government’s Goods and Services Tax
(GST) 2.0 strategy, with December 2025 collections reflecting business
activities of November 2025 showcasing the first full month of post-rate
cut & post festive buying.
Core Sector Production:
The index of eight core sector industries grew (+1.8% YoY) in November
2025, against a (-0.1%) degrowth in October 2025. Four out of eight
constituent segments grew YoY, driven by Cement production (+14.5%
YoY), Fertilizers (+5.6% YoY), Steel (+6.1% YoY) & Coal (2.1% YoY).
Industrial Production:
Factory output growth as measured by the Index of Industrial Production
(IIP) grew YoY by (+6.7%) in November 2025, vs a growth of (+0.4%) YoY in
October 2025. Driven by negative growths in 2 of 3 major sectors- Mining
(+5.4% YoY), Manufacturing (+8.0% YoY) and Electricity (-1.5% YoY).
Credit growth:
Scheduled Commercial Bank Credit growth for November 2025 rose to
(+11.4%) YoY vs (+10.6%) YoY as of November 2024. Agriculture and allied
activities credit in September 2025 was stable at (+9.0%) YoY, while
industrial sector credit grew by (+10.0%) YoY, the services sector credit
grew by (+11.7%) YoY.
Inflation:
November’s 2025 Consumer Price Index (CPI) inflation rate accelerated
MoM to 0.30%, down from (-1.44%) in September 2025. Food inflation
slowed YoY to (-3.91%), down from (-5.02%) in the previous month of
October 2025 but remaining negative for the Sixth consecutive month.
The Wholesale Price Index (WPI) inflation fell sequentially in November
2025, with the print at (-0.32%) YoY, primarily due to decrease in prices of
food articles, mineral oils, crude petroleum & natural gas, manufacture of
basic metals and electricity etc.
Trade Deficit:
Indian Merchandise Exports rose by (+19.37%) YoY to $38.13 Bn in
November 2025 (a 6-month high), supported by government measures,
including export incentives aimed at mitigating the economic impact of
the 50% US tariffs imposed at the end of August 2025. While Imports fell
by 1.88% YoY to $62.66 Bn, largely due to a sharp drop of around 60% in
gold imports, alongside declines in oil and coal shipments. Merchandise
trade deficit fell to $24.53 Bn, degrowing (23.15%) YoY.
Events to watch out for in January 2026:
Trade Related News flow:
Tariff news flow remains volatile, with
changes to be monitored closely by the markets. Indian bilateral
agreements to be watched.
Federal Open Market Committee (FOMC Meet):
The US Federal
Reserve announced a 25bps interest rate cut to the range of 3.50%-3.75%
after its two-day policy meeting ended on 10th December 2025, marking
the third consecutive cut of the year. The vote was a divided one with one
member dissenting for a 50-bps cut and two others opposing any cut—the
most dissents since 2014. The next Federal Open Market Committee
(FOMC) meet is scheduled for 27-28th January, 2025.
The Reserve Bank of India Monetary Policy Committee (RBI MPC)
Meet:
The RBI's Monetary Policy Committee (MPC) conducted its
monetary policy meeting from 3rd to 5th December 2025. On the basis of
an assessment of the evolving macroeconomic situation, the Monetary
Policy Committee (MPC) unanimously reduced the repo rate by 25 bps to
5.25%. The MPC will meet next in February, 2026.
Other things to watch out for:
Oil Market volatility with the Organization
of the Petroleum Exporting Countries (OPEC+) has paused further
increases for the first quarter of 2026 due to seasonal demand weakness
and concerns about a global supply surplus. The group recently reaffirmed
this policy in a meeting on January 4, 2026.
Geopolitical concerns with US military action against Venezuela, Uncertainties in the Gaza strip & Russia-Ukraine tensions still ongoing amidst other numerous conflicts
Geopolitical concerns with US military action against Venezuela, Uncertainties in the Gaza strip & Russia-Ukraine tensions still ongoing amidst other numerous conflicts
Monthly Performance for Key Indices:
Source:NIMF Research, Bloomberg
.*Calendar year returns.
Note:Market scenarios are not reliable indicators for current or future performance. The same should not be construed as investment advice or as any research report/research recommendation
Past performance may or may not be sustained in future.
Note:Market scenarios are not reliable indicators for current or future performance. The same should not be construed as investment advice or as any research report/research recommendation
Past performance may or may not be sustained in future.
Market View
Indian equity markets entered the year of 2026 regaining their previous
highs following last year’s correction, while valuations though off their
peaks, remain in line with long-term averages.
Markets have witnessed a narrow trend with large cap indices like Nifty 50
outperforming the broader markets in CY2025. Overall, the performance
gap widened between the large cap and small cap indices reflecting the
selloff in small cap stocks driven by relatively higher valuations.
India’s valuation premium over emerging markets and global peers has
meaningfully narrowed from the peaks.
The earnings cycle seems to have bottomed out, with signs of a sustained
recovery ahead. Corporate earnings is expected to trend higher on the
likely improvement in domestic growth/demand.
Domestic consumption demand is expected to remain buoyant, driven by
trends for premiumization, rural recovery supported by agricultural
activity and fiscal support from state governments. all these factors create
a favourable back support for economic growth and expansion.
GST cuts and Income tax rationalisation has kept sentiments positive.
Some sectors have benefited from these changes – mostly on
discretionary side. Long term benefits of GST cuts are likely to accrue.
Global macro uncertainty persists along with the geo-political
development and may lead to higher volatility in the near term. Global
geopolitical conditions have not improved despite expectations. India’s
tariff deal is yet to be finalized, prolonging the uncertainty.
This was reflected in the large FII outflows while the Domestic investors
continued to be supportive.
Asset allocation in line with the risk appetite of the investor is an
important tool to navigate any unanticipated volatility. While valuations
have moderated from the peaks of last year, overall economic recovery
and the global uncertainties needs to be monitored in this regard Large
Cap & Large Cap oriented diversified strategies along with hybrid funds
appear to be better placed on risk-reward basis, while Mid/Small cap
allocation may be considered in a staggered manner through systematic
investment with a long-term view.
Chart of the Month:
Revival of credit growth led by consumer credit on the back of the falling
interest rates and festive cheer. Credit growth is also expected to get
further support from liquidity enhancement measures by RBI, which may
enable banks to have more lendable resources.
Source:
NIMF Research, Bloomberg
Disclaimer:
The current fund philosophy may change in future depending on market conditions or fund manager’s views. The sectors mentioned
are not a recommendation to buy/sell in the said sectors. The scheme may or may not have future position in the said sectors.
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therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been
prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The
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