Market Watch

Equity Market Overview – April 2026

Domestic Equity Market Update

Indian equities ended the month on a positive note. Large cap-oriented BSE Sensex ended higher by 6.9% (MoM) and Nifty 50 ended higher by 7.5% (MoM). While the BSE Midcap index ended higher by 13.8%(MoM) and BSE Small cap index ended higher by 19.6% (MoM).

In terms of BSE sectoral indices, the sectors ended on a positive note. Power, Realty, Capital Goods, Infrastructure and Metals were the outperformers during the month.

During the month, FPIs were net sellers in equities to the tune of Rs 410 bn. (Data as on 29th April). 

Domestic equity markets ended the month on a positive note with reports suggested that Iran had proposed reopening the Strait of Hormuz and easing the conflict. Intermittent fall in oil prices and renewed West Asia peace negotiations in mid of the month also supported market sentiment. However, investor sentiment remained cautious as stalled US – Iran negotiations and reports of renewed tensions resurfaced.

 

Global Market Updates

US equity markets ended the month on a positive note supported by a decline in Brent crude prices after reports that Iran conveyed its response to the latest US proposal via Pakistani mediators thus markets were driven by Middle East ceasefire optimism and diplomatic progress.

European equity markets ended the month on a positive note after a US–Iran ceasefire agreement improved investor sentiment. Falling oil prices and softer bond yields in middle of the month also supported broad based gains,

Brent oil prices rose from USD 72.48 per barrel to USD 108.26 during the month as investors weighed the UAE’s surprise exit from OPEC against diminishing prospects of a near-term resolution to the Iran conflict, with stalled US – Iran talks and continued disruption in the Strait of Hormuz also supported prices.

Most of the Domestic Macro data points showed a strong picture

According to the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), India’s economic growth forecast for CY26 has been downgraded to 6.4% YoY.

Moody’s Ratings downgraded India’s growth forecast for FY27 to 6% YoY from 6.8% YoY estimated earlier, citing weaker consumption and industrial activity.

The International Monetary Fund (IMF) raised its forecast for India’s GDP growth in FY27 by 10 bps to 6.5% YoY, from 6.4% YoY projected in its January 2026 outlook, expecting the adverse impact of the conflict in West Asia to be outweighed by the reduction in additional US tariffs on Indian goods from 50% to 10%.

The Asian Development Bank (ADB) raised India’s GDP growth forecast in FY27 by 40 bps to 6.9% YoY compared to its December 2025 forecast of 6.5% YoY.

According to S&P Global Ratings, India's robust macroeconomic and financial sector fundamentals are likely to cushion the impact of a sustained oil price shock, though economic growth could slow by up to 80 bps if crude averages USD 130 per barrel in 2026.

According to Moody’s Analytics’ latest Asia-Pacific outlook report, India’s unemployment rate is projected to rise marginally to 7.0% in CY26 from 6.9% in CY25.

Data from the Ministry of Statistics and Programme Implementation showed that India’s Industrial Production advanced 4.1% YoY in March 2026, following a downwardly revised 5.1% YoY expansion in February 2026.

RBI’s data showed that Bank Credit grew by 15% YoY in the fortnight ended April 15, 2026, lower compared to 16.1% YoY growth recorded in the previous fortnight. On the other hand, deposit growth was 12.2% YoY in the fortnight compared to 13.5% YoY in the previous fortnight.

The National Statistics Office (NSO) proposed using aggregated Goods and Services Tax (GST) data to monitor the progress of the services sector through an Index of Service Production (ISP) with 2024-25 as the base year.

As per official data, India's core infrastructure sector contracted 0.4% YoY in March 2026 to its lowest in nearly two years, marking a sharp reversal from the 2.8% YoY recorded in February.

According to an analysis of the latest commerce-ministry data, exports of electronics from India are running those of oil products close, with the gap between the two reducing to a record low of USD 5.9 bn in FY26. In FY22, it was USD 73.9 bn. 

Govt. data showed that China has overtaken the US to emerge as India's largest trading partner in FY26, with bilateral trade reaching USD 151.1 bn, while the country's trade deficit with Beijing widened to USD 112.16 bn during the period.

As per commerce ministry, India’s goods trade emerged relatively unscathed through the first month of the US-Iran conflict, with exports hitting a one-year high of USD 39 bn to help close FY26 with a 0.9% YoY uptick, and the import bill shrinking 6.5% YoY to under USD 60 bn.

Flash survey results from S&P Global showed that the HSBC flash composite output index climbed to 58.3 in April 2026 from 57.0 in March 2026.

As per S&P Global, India’s manufacturing activity slowed in March 2026, with the HSBC India Manufacturing Purchasing Managers’ Index falling to 53.9 from 56.9 in February 2026.

As per S&P Global data, the HSBC India Services PMI Business Activity Index fell to 57.5 in March 2026 from 58.1 in February 2026, marking the weakest expansion in 14 months.

CRISIL said that despite the West Asia crisis having ripple effects on all sectors of the Indian economy, infrastructure investments are likely to see a 45-50% YoY growth over the next two financial years through March 2028. 

As per ICRA, India's passenger vehicle industry growth is projected to moderate to 4-6% YoY in FY27 after an estimated 7-9% YoY rise in FY26, driven by a high base.

According to a new study by Boston Consulting Group (BCG), India has emerged as the global frontrunner in adopting artificial intelligence (AI) for healthcare, with 85% of consumers already using AI-driven tools for personal health. 

From Nifty 200 universe, 68 companies have announced their Q4 FY26 earnings thus far. At an aggregate level, Sales, EBITDA and PAT have grown by 13.36%, 12.28% and 11.20% YoY, respectively. Excluding Financials, Sales, EBITDA and PAT have grown by 17.59%, 11.75% and 8.74% YoY respectively. 

From Nifty 500 universe, 148 companies have announced their Q4 FY26 earnings thus far. At an aggregate level, Sales, EBITDA and PAT have grown by 12.53%, 12.32% and 11.71% YoY, respectively. Excluding Financials, Sales, EBITDA and PAT have grown by 15.65%, 12.74% and 9.07% YoY respectively.

Outlook & Investment Strategy

Going forward, the Indian equity market is likely to be driven by any moves around the final details pertaining to India-US trade deal, Q4FY26 earnings season and guidance given by managements, crude price volatility, rising concerns over AI-led disruptions, geopolitical tensions, movement in the US Dollar index and INR, improvement in consumption demand, FPI/DII flows and moves by the RBI to support liquidity. Early trends from earnings season seem to indicate steady numbers across sectors.

With the recent correction, driven by the ongoing war in the middle east and the blockade of Strait of Hormuz by Iran, the market valuations have come off and are now looking reasonable. Most of the Broad Indian indices are trading at a meaningful discount to their past averages.  The selling pressure from FPIs rose in the month of March driven by weakening INR and expectations of impact on the Indian economy from the rising energy prices.  Indian markets have seen similar issue in 2022, when the Russia-Ukraine war started, but as the crude oil prices came off, the markets moved higher, and the economic growth surprised on the upside. Interestingly, Mutual Funds’ cash, as a percentage of their total AUM, has dipped to recent lows, suggesting that Indian Mutual Funds feel that valuations are right to deploy higher cash.

The US-Iran conflict has emerged as the near-term risk to markets which can drive oil prices higher and be near term sentiment-negative event. Negotiations for a ceasefire between US and Iran did not fructify as both sides could not agree upon a de-escalation path. In case, if it fructifies it will be a positive for the equity markets. If the conflict is contained to existing players and the energy prices come off due to movement of tankers in Persian Gulf, investors could use the market volatility due to this event as an investing opportunity.

With the recent correction, opportunities in the Indian equity market may get broad based as valuations have come off across market caps. Fund Managers who can be fairly nimble and identify growth ideas, could generate alpha vs their peers. While FPIs have been big sellers in the Indian markets, India’s relative underperformance vs its peers in the recent months is likely to gradually make the Indian markets attractive for them. The FPI’s holdings in Indian markets have also fallen to recent lows which implies that they may not be willing sellers for long.

Investment deployment strategy could be 60% lumpsum and rest 40% to be staggered over the next 3-4 months. Mutual Fund investors can look to focus on categories like Flexicap, Multicap, Large and Midcap, Value and Hybrid funds while using STPs as an instrument to invest in Midcap and Smallcap funds. Aggressive investors may also look at Business Cycle Funds for allocation. All allocations should be done in line with the risk profile and product suitability of the investor.

Debt Market Overview March 2026

Banking system liquidity as measured by the Reserve Bank of India’s (RBI) net Liquidity Adjustment Facility (LAF) stood at a daily average surplus of ~Rs 3.84 trillion in April 2026 as against a daily average surplus of ~Rs 1.57 trillion in the previous month. The call money market traded in the range of ~4.70-5.34% during the month.

Domestic G-sec yields closed lower in April 2026, and the 10-year benchmark, 6.48% G-Sec 2035 bond, ended at 7.01% compared to the previous month’s close of 7.03%. Indian G-sec yield initially surged, after the US President signaled the possibility of more aggressive strikes on Iran, driving crude oil prices higher and clouding India’s macroeconomic outlook ahead of the RBI’s April 2026 interest rate decision. Prices rebounded following a framework for ending the five-week conflict in West Asia. They rose further as a pause in the conflict cooled oil prices and a neutral central bank policy aided sentiment. Further gains were muted as crude oil prices rose on an indefinitely extended US–Iran ceasefire, intensifying pressure on India’s macroeconomic outlook.  

The US Labor Department said that Consumer Price Index of US jumped by 0.9% MoM in March 2026 after rising by 0.3% MoM in February 2026, annually it accelerated to 3.3% YoY, the highest level since May 2024, up from 2.4% YoY in February. The US Federal Reserve decided to maintain the target range for the federal funds rate at 3.50-3.75% for the third consecutive meeting. The Fed announced its widely expected decision to leave rates unchanged, although the vote was unusually divided. Final data from Eurostat showed that the Eurozone’s Harmonized Index of Consumer Prices rose 2.6% YoY in March, revised up from the initial estimate of 2.5% YoY. This followed a 1.9 % YoY rise in February 2026. The European Central Bank kept interest rates on hold at its April meeting. The interest rates on the deposit facility, the main refinancing operations and the marginal lending facility were unchanged at 2.00%, 2.15% and 2.40% respectively. The People's Bank of China maintained its one-year Loan Prime Rate (LPR) at 3.0% for the 11th straight session. Similarly, the five-year LPR, the benchmark for mortgage rates, was retained at 3.50%.

India’s CPI-based Inflation rose to 3.40% YoY in March 2026 from 3.21% YoY in February 2026, driven by higher food inflation. India’s Wholesale Price Index (WPI), rose to a 38- month high of 3.88% YoY in March 2026 from 2.13% YoY in February 2026. The uptick was led primarily by increase in prices of crude petroleum, natural gas and manufactured products. India's Merchandise Trade Deficit narrowed to USD 20.67 bn in March 2026, amid risks the Iran war could impede exports to Gulf countries while raising the cost of energy and other imports.  Gross GST collection rose 8.7% YoY to a record of about Rs 2.43 trillion in April 2026. Net GST collections stood at Rs 2.11 trillion in April 2026, up 7.3% YoY.

The liquidity condition, as measured by RBI’s net LAF, deteriorated, but remained in surplus during the week. In its April 2026 MPC meeting, the RBI had kept the Repo Rate unchanged at 5.25% and continued with its neutral stance. RBI estimated Consumer Price Index (CPI) inflation for FY27 at 4.6% YoY. RBI also introduced a core inflation estimate of 4.4% YoY. Real GDP growth for 2026-27 is projected at 6.9% YoY. India’s retail inflation, measured by the Consumer Price Index (CPI), accelerated to 3.40% YoY in March 2026, from 3.21% YoY in February 2026, based on the new series data. The RBI also highlighted upside risks to inflation and downside risks to the domestic growth outlook driven by increased energy price pressures and probable weather disturbances affecting food prices. The recent cut in excise duty can weigh down on fiscal numbers, resulting in near term volatility in bond yields. On the other hand, if India’s nominal growth picks up, it will aid in tax collection. This, along with persistent liquidity support, robust FPI inflows, the probable inclusion of Indian G-secs in Bloomberg’s index, lower duration supply as announced by RBI, any positive effect of recently concluded trade deals, government’s continuous focus on fiscal consolidation which may lead to favorable demand-supply dynamics, and probable de-escalation of the Middle East conflict may aid in keeping liquidity comfortable and be a positive for debt yields during latter half of CY26. In the US, as widely anticipated and due to ongoing geopolitical disruption, the Federal Reserve kept rates unchanged in the April Policy meeting, keeping their target range at 3.50-3.75%. In the near term, the duration and severity of geopolitical tensions in the Middle East will continue directing sentiments and capital flows and thus remains a key monitorable. If crude prices remain elevated for a longer period, it could have an adverse effect on India’s headline inflation, GDP growth and Current Account Deficit, making monetary policy decisions trickier.  

Thus, at this juncture, with lucrative yields, a case continues to exist for investment into corporate bond funds that are at the 1-4-year segment of the curve. Hence, investors can look at Corporate Bond Funds and Banking & PSU Debt Funds for a horizon of 15 months and above. For a horizon of 24 months and above, investors may consider Income Plus Arbitrage FoF or consider Dynamic Bond Funds for tactical opportunity. As yields in the less than 1-year segment remain tight, investors can consider Money Market Funds for a horizon of 3 months and above. Whereas for a horizon of up to 3 months, investors can consider Overnight Funds and Liquid Funds. Investors should invest in line with their risk profile and product suitability.

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