Macro and
Equity Market
Outlook
Equity Market
Outlook
GLOBAL MACRO & MARKETS
India’s NSE NIFTY 50 index ended the month of February 2026 in red
(-0.6%). Among major global indices, the Japanese NIKKEI (+10.4%),
Morgan Stanley Capital International (MSCI) World (+0.6%), the Euro 50
(+3.2%) and the S&P 500 (-0.9%) ended the month of February 2026 with
positive returns. Performance was mixed among Emerging Market (EM)
indices, with the MSCI EM, Hang Seng, BOVESPA Brazil recording
sequential returns of (+5.4%), (-2.8%), and (+4.1%) respectively.
The London Metals Exchange (LME) Metals Index rose (+1.5%) in February
2026, as global trade tensions remained volatile. West Texas Intermediate
(WTI) and Brent Crude rose MoM, by (2.8%) and (2.5%), respectively, as
markets remained cautious given tariff uncertainties and geopolitical
concerns.
The Dollar Index rose (+0.6%), through February 2026, with the US Dollar
(USD) appreciating vis-à-vis Emerging Market (EM) currencies (+0.7%) and
depreciating against the Indian Rupee (INR) on the spot market (-1.1%).
India 10Y G-Sec yields fell by 3.60 bps, while US 10Y G-Sec yields fell by
29.80 bps, and the German Bund yield fell by 20 bps, with rates settling at
6.66%, 3.39% and 2.64%, respectively.
Domestic Macro & Markets
The BSE SENSEX fell (-1.2%) in February 2026, in line with the NSE NIFTY
Index. The BSE Mid-cap index & the BSE Small-Cap index Outperformed the
BSE SENSEX, rising by (+1.4%) & (+0.5%), over the month of February 2026,
respectively. Sector-wise, Power, Consumer Durables and Healthcare were
the top outperformers over the month of February 2026, clocking (+9.0%),
(+7.0%) and (6.2%) respectively. Ten out of BSE Sensex’s 13 major sectoral
indices ended the month of February 2026 in green.
Net Foreign Institutional Investors (FII) flows into equities were Positive for
February 2026 at (+$2.50 Bn), following (-$3.98 Bn) in January 2026.
Domestic Institutional Investors (DIIs) remained net buyers of Indian
equities for the 30th consecutive month with flows of +$4.23 Bn in
February 2026 compared to (+$7.61 Bn) In January 2026.
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 February 2026
rose to 56.9 from 55.4 in January 2026, hitting a 4-month high & continuing to
remain in the expansion zone (>50) for the 52nd straight month. The figure
remained well above the long-term average, signalling continued strength in
the sector. The reading indicates a notable improvement in operating
conditions. Factory output expanded at the fastest pace in four months,
supported by strong domestic demand and rising new orders, although
growth in new export orders slowed to the weakest in 17 months.
Employment rose slightly, recording the fastest pace in four months, as firms
hired to cope with higher workloads. Input purchases and inventories
expanded at the quickest pace in three months, reflecting increased
production needs and precautionary stock building. Input cost inflation
remained moderate and unchanged from January, while output prices rose at
a faster rate, outpacing the long-run trend. Backlogs of work rose marginally
to a seven-month high, and firms remained optimistic about output over the
year.
Goods and Services Tax (GST) Collection:
Gross collections of INR 1.83 Tn (+8.1% YoY) in February 2026 concluded
the forty seventh consecutive month of collections over the INR 1.4 Tn
mark. These figures reflect the fact that there has been a consumption
uptick that has more than compensated for the rate reductions.
Core Sector Production:
The index of eight core sector industries grew (+4.0% YoY) in January
2026, against a 4.7% growth in December 2025. Five out of eight
constituent segments grew YoY, driven by Cement production (+10.7%
YoY), Fertilizers (+3.7% YoY), Steel (+9.9% YoY), Electricity Generation
(+3.8% YoY) & Coal (3.1% YoY).
Industrial Production:
Factory output growth as measured by the Index of Industrial Production
(IIP) grew YoY by (+4.8%) in January 2026, vs a growth of (+8.0%) YoY in
December 2025. Driven by positive growths in all the 3 major sectors-
Mining (+4.3% YoY), Manufacturing (+4.8% YoY) and Electricity (5.1% YoY).
Credit growth:
Scheduled Commercial Bank Credit growth by mid-February 2026 rose to
(+13.6%) YoY vs (+13.1%) YoY as of mid-January 2026. Agriculture and
allied activities credit in January 2026 grew by (+11.4%) YoY, while
industrial sector credit grew by (+12.1%) YoY, the services sector credit
grew by (+15.5%) YoY.
Inflation:
Jan’26 Consumer Price Index (CPI) inflation rate accelerated YoY to 2.75%,
up from 1.33% in Dec’25. Food inflation accelerated YoY to 2.13% , up
from (-3.91%) in the previous month of Dec’25 turning positive after Seven
consecutive months of negative inflation and the first reading in RBI’s
2~4% tolerance band. The Wholesale Price Index (WPI) inflation rose
sequentially in Jan’26, with the print at (+1.81% ) YoY, primarily due to
increase in prices of primary articles and manufactured products.
Trade Deficit:
Indian Merchandise Exports rose by (+0.6%) YoY to $36.56 Bn in January
2026. Imports rose by (+19.2%) YoY to $71.24 Bn. Merchandise trade
deficit rose to $34.68 Bn, growing 48.01% YoY.
Events to watch out for in March 2026:
Trade Related News flow:
Finalisation of the Trade deal with the USA
during February 2026 seen as a good positive for the markets as it aims to
significantly reduce tariffs applied in early 2025. In addition to the FTA with
EU in January 2026. Finalisation of Indian bilateral agreement with Canada
& the GCC to be watched closely.
Federal Open Market Committee (FOMC Meet):
The outcome of the
FOMC meeting held on January 28, 2026, was that the Federal Reserve
decided to keep the interest rate unchanged at 3.5% to 3.75%. This
decision was made after a two-day meeting, emphasizing a cautious
approach due to persistent inflation pressures and signs of stabilizing
labour market conditions. The FOMC's vote was not unanimous, with two
members dissenting and preferring a rate cut. The next Federal Open
Market Committee (FOMC) meet is scheduled for 17-18th March 2026.
The Reserve Bank of India Monetary Policy Committee (RBI MPC)
Meet:
The RBI's Monetary Policy Committee (MPC) conducted its
monetary policy meeting from 4th to 6th February 2026. After a detailed
assessment of the evolving macro-economic conditions and the economic
outlook, the MPC voted unanimously to keep the policy repo rate
unchanged at 5.25%. The decision comes amid an improved growth
backdrop following higher government spending outlined in the Union
Budget, the announcement of an India–US trade deal, and progress on the
India–EU free trade agreement, allowing the central bank to stay on hold
while assessing evolving conditions. The MPC is expected to meet next in
Apr’26.
Other things to watch out for:
Organization of the Petroleum Exporting
Countries (OPEC+) has announced to increase production in April amidst
the geopolitical tensions in the middle east in Feb’26. Geopolitical
concerns with US & Israel’s military action against Iran in late Feb’26, US
military action in Venezuela in Jan’26, Uncertainties in the Gaza strip &
Russia-Ukraine tensions still ongoing amidst other numerous conflicts.
Monthly Performance for Key Indices:
Source:NIMF Research, Bloomberg, RBI
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
In addition to the disruption fears around impact of Artificial Intelligence
(AI) the rising political tensions in the Middle East region i.e.US-Israel and
Iran conflict has increased the near-term uncertainty for markets.
AI disruption fears are impacting software businesses globally and
recently have also impacted IT Services companies PE multiples. Rapid
deterioration in potential long term growth expectations.
Some of these macro events have overshadowed the positive
developments from a domestic perspective like the India – European
Union (EU) FTA (Free Trade Agreement) and interim trade deal framework
with US. Also, the US tariff order by US Supreme court puts a standard rate
of tariff for India as well negating relative disadvantage.
Further growth numbers for Indian companies in Q3 have started to show
first signs of improvement. The earnings cycle seems to have bottomed
out, with signs of a potential recovery ahead. Corporate earnings are
expected to trend higher on the likely improvement in domestic
growth/demand.
India's relative valuation to Emerging markets has moderated
meaningfully over the last year and more, creating a better base for global
investors.
However, with rising geopolitical tensions, its potential impact on Oil
prices if the conflict extends longer and uncertainty on the US
administration’s tariff policies in wake of the recent court verdict etc is
likely to keep the short-term volatility elevated.
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:
India's foreign exchange reserves are near record highs at $723.6Bn (as
of 20thFeb’26). These elevated reserves may come handy in an
environment of heightened geopolitical uncertainties.
Source:
Bloomberg
Common Source:
NIMF Research, Bloomberg
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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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