Market Overview
Indian equity markets exhibited high volatility with the Nifty 50 declining for multiple sessions, closing near 25,170-25,200, driven by foreign institutional investor (FII) outflows and concerns over US H-1B visa fee hikes impacting IT stocks. However, sectors like auto, banking, defence, and metals showed resilience, supported by festive demand, GST reforms, and government initiatives. The rupee hit a record low against the dollar, but domestic institutional investors (DIIs) provided support with net buys. Globally, mixed Federal Reserve signals on interest rates and AI-driven tech gains influenced sentiment, while strong IPO activity and economic indicators like core sector growth at a 13-month high of 6.3% offered optimism. Overall, sentiment remains mixed with sectoral divergences and cautious near-term outlook.
Key Sectors in Focus
Information Technology (IT) (DOWN)
The IT sector faced significant pressure due to US H-1B visa fee hikes to $100,000, raising concerns over increased costs and reduced profitability for Indian firms. Stocks like Infosys, TCS, and Tech Mahindra declined, with analysts noting potential margin impacts of 1-3% and weak growth of 2-4%. However, some experts view this as a temporary issue, expecting gradual recovery from Q3FY26, with automation and reduced dependency mitigating long-term effects.
Automobile (UP)
Auto stocks surged, driven by festive season demand, GST rate cuts, and strong sales reports. Companies like Maruti Suzuki, Tata Motors, and Ashok Leyland reported record inquiries and deliveries, with the Nifty Auto index rising up to 1.5%. Analysts project sustained growth, supported by competitive pricing and upgraded forecasts, though high PE ratios warrant caution.
Banking and Financial Services (UP)
Banking stocks showed strength, with gains in both PSU and private banks like SBI, Axis Bank, and AU Small Finance Bank. Factors include improved asset quality, festive credit growth, and positive analyst projections of up to 20% CAGR for private banks. However, rising slippages and margin pressures pose risks, with net interest margins hitting multi-year lows.
Defence (UP)
The defence sector boomed due to 'Make in India' initiatives, government contracts, and rising demand, with the market projected to grow significantly by 2033. Stocks like Mazagon Dock, Cochin Shipyard, and Zen Technologies benefited from drone contracts and naval expansions, though high valuations indicate risks.
Metals and Steel (UP)
Metal stocks advanced on improved industrial demand, China-led supply cuts, and positive outlooks from firms like Nomura. JSW Steel and Tata Steel hit 52-week highs, with cyclical recovery and capacity expansions driving optimism.
Renewable Energy (UP)
The sector gained from GST cuts on renewable energy, projected to save ₹1-1.5 trillion by 2030, and strong IPO activity from companies like Solarworld. Adani Green Energy surged over 11%, reflecting investor confidence in India's 500 GW capacity goals.
Infrastructure (UP)
Infrastructure firms saw positive momentum with major order wins, such as KEC International's ₹3,243 crore contract and HCC's Patna Metro deal, boosting revenue visibility. Government initiatives like the National Infrastructure Pipeline support long-term growth.
Stock Spotlight
| Company | Movement | Insight |
|---|---|---|
| Vodafone Idea | Surged up to 7% | Stock rallied on anticipation of Supreme Court relief on AGR dues and government support as an equity holder, with Citi rating it a 'high-risk' buy, though high debt remains a concern. |
| Adani Group stocks (e.g., Adani Enterprises, Adani Green) | Mixed; Adani Green surged 11.75%, Adani Power plunged up to 6% | Shares rebounded after SEBI's clean chit on Hindenburg allegations, with Adani Green benefiting from renewable energy optimism, but profit-booking and volatility caused declines in others. |
| Maruti Suzuki | Gained up to 3.2% | Surged on dividend announcements, record festive sales with 80,000 inquiries in a day, and GST cuts, reflecting strong consumer demand and analyst upgrades. |
| Yes Bank | Positive sentiment from stake acquisition | Sumitomo Mitsui Banking Corporation increased stake to 24.22%, boosting confidence in corporate banking and governance improvements. |
| KEC International | Surged up to 8% | Secured a record ₹3,243 crore international order, enhancing order book and growth prospects in transmission and distribution. |
| Zaggle Prepaid Ocean Services | Surged over 5% | Rose after partnerships with Mastercard and AU Small Finance Bank for co-branded cards, driving optimism in fintech and digital payments. |
| JSW Steel | Rose 2.09% to 52-week high | Gained on strong quarterly profit, metal demand outlook, and bullish analyst calls, with Nomura forecasting 16% upside. |
Economic Indicators
Inflation
Benign, with projections below 2% for September-October and average of 2.9% in FY26, supporting potential RBI rate cuts.
Interest Rates
RBI advocated for a pause, but SBI Research suggests a 25 bps cut due to low inflation; globally, Fed rate cut expectations influence markets.
Gdp
Q1 FY26 growth accelerated to 7.8%, with OECD raising FY26 forecast to 6.7%, driven by domestic demand and reforms.
Other Relevant Indicators
Core sector growth hit a 13-month high of 6.3% in August 2025; HSBC Composite PMI eased to 61.9 but remains expansionary; rupee hit record low of 88.49-88.76/USD; GST reforms simplified to 5% and 18% slabs, boosting consumption.
Global Market Influences
Global influences were mixed: US tech stocks hit record highs on AI optimism (e.g., Nvidia's OpenAI investment), supporting risk appetite, but US H-1B visa fee hikes and tariff concerns pressured Indian IT and exports. Federal Reserve rate cut expectations drove safe-haven demand for gold, while geopolitical tensions and oil supply risks added volatility. Key markets include the US and China, with Asian currencies weakening broadly.
Commodity Trends
Gold (UP)
Surged to record highs (e.g., ₹1,14,300 per 10g) driven by Fed rate cut bets, geopolitical tensions, and strong central bank buying, with ETF inflows at three-year highs.
Silver (UP)
Hit all-time highs, supported by similar factors as gold, with industrial demand and investment appeal amid volatility.
Crude Oil (MIXED TO UP)
Prices rose on supply concerns from Middle East tensions and Russian risks, but oversupply fears and weak demand capped gains; ICICI Direct forecasts potential rises to $63-66.
Copper (UP)
Gained on Chinese demand and supply disruptions, with structural deficits indicating upward pressure, though profit-booking caused brief declines.
Steel (UP)
Buoyed by improving demand, expected price hikes, and China-led supply cuts, benefiting metal stocks.
Expert Opinions
Analysts express cautious optimism: Nifty 50 is expected to trade in a range of 25,000-25,500, with support at 25,000-25,150 and resistance at 25,400-25,500. IT sector woes are seen as temporary, with recovery expected from Q3FY26. Auto, banking, and defence sectors are favored for growth, but high valuations warrant caution. Experts advise buy-on-dips strategies, monitoring RBI policy, global cues, and IPO performances for direction.
Market Outlook
Short-Term Projection
The market outlook is volatile with a cautious bias, influenced by FII outflows, IT sector pressures, and rupee weakness. However, domestic strengths like festive demand, GST reforms, and strong IPO activity may provide support. Key levels to watch are Nifty support at 25,000-25,150 and resistance at 25,400-25,500; a break below support could lead to further declines. Sectoral divergences will persist, with auto, banking, and metals likely outperforming, while global factors from Fed actions and geopolitical events remain critical.