Mumbai- India’s market outlook is becoming increasingly positive as strong GDP growth, stabilising earnings expectations, and supportive policy measures begin to bolster investor confidence, according to a new report released on Monday by SBI Funds Management.
The report notes that while short-term challenges persist, the overall environment for equities is gradually improving, paving the way for steady, measured growth in the coming months.
India’s real GDP remained well above expectations, growing 7.8% in Q1 FY26 and 8.2% in Q2 FY26. Equity markets also performed well in November, with the Nifty up 2% and the Sensex rising 2.2%, according to the report by Rajeev Radhakrishnan, CFA (CIO – Fixed Income), and Gaurav Mehta, CFA (Head – SIF Equity).
SBI Funds pointed out that large-cap stocks continued to outperform mid- and small-cap segments, a trend reflected in narrowing market breadth. Within the BSE 500, nearly two-thirds of stocks underperformed the index on a rolling 12-month basis. The fund house expects this divergence to continue, as large caps remain more reasonably valued compared to the broader market.
Corporate earnings for the recent quarter were subdued but largely in line with expectations. Sectors such as metals, NBFCs, capital goods, cement, and telecom posted profit growth, while private banks, oil & gas (excluding OMCs), automobiles, consumer companies, and insurers saw weaker results.
Positively, earnings expectations are beginning to stabilise, with the number of upgrades now nearly matching downgrades—marking a shift after months of downward revisions.
SBI Funds also highlighted improving consumer sentiment driven by income tax and GST cuts, easing inflation, and the gradual transmission of policy rate reductions. It added that structural reforms like the new labour codes are expected to further support growth.
However, the report cautioned that global trade uncertainties and fiscal pressures may create temporary obstacles.
Market sentiment overall has strengthened, with SBI Funds expecting future gains to be gradual. The fund house noted that opportunities will likely emerge more at a stock-specific level rather than through broad market-wide rallies.
With inputs from IANS