Mumbai: India’s market outlook is steadily getting brighter. A recent report says that solid GDP growth, sharper earnings expectations, and a kind monetary stance are beginning to lift investor mood. SBI Funds Management notes that although short‑term hurdles linger, the overall backdrop for equities is inching toward improvement, setting the stage for a calm yet upward trajectory.
SBI Funds highlights that real GDP still beats forecasts, expanding 7.8 % in Q1 FY26 and 8.2 % in Q2 FY26. In November, the equity markets posted healthy gains: the Nifty rose 2 % and the Sensex climbed 2.2 %, according to Rajeev Radhakrishnan, CFA (CIO – Fixed Income) and Gaurav Mehta, CFA (Head – SIF Equity). The study finds large‑cap stocks continued to outperform mid‑cap and small‑cap names, signaling a narrowing market breadth.
In the BSE 500 universe, nearly two‑thirds of stocks lagged the index over the past 12 months. The firm expects this polarization to persist, as large caps remain more fairly valued than the broader market. Corporate earnings in the latest quarter were modest but broadly in line with expectations. Profits rose in sectors such as metals, NBFCs, capital goods, cement, and telecom, while private banks, oil and gas (excluding OMCs), autos, consumer firms, and insurers posted softer results.
Encouragingly, earnings expectations are stabilising. The number of upgrades is now close to matching downgrades—a shift from months of downward revisions. SBI Funds notes that consumer sentiment is improving thanks to income‑tax and GST cuts, a decline in inflation, and the anticipated transmission of policy‑rate cuts. “Structural reforms such as new labour codes are also expected to support growth,” the report says. Nevertheless, the house cautions that global trade uncertainty and fiscal pressure could pose temporary headwinds. Market sentiment has been on the rise, and SBI Funds expects any future gains to be gradual, with more opportunities emerging at the stock‑specific level rather than from a broad market rally.
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