Market Performance Summery – August 26:
Overview:
- The Nifty 50 slipped to 24,080.40, down 1.14%, while the BSE Sensex fell to 76,957.27, down 1.46%, snapping a two-month winning streak.
- Broader markets bucked the trend: the Nifty Smallcap 100 advanced 3.16% and the Nifty Midcap 100 rose 2.15%, a fifth straight monthly gain, while the Nifty 100 declined 0.88%.
What Changed?
- Renewed geopolitical tension, elevated crude and uncertainty over US interest rates weighed on large caps, reversing July’s momentum. The Nifty moved in a tight 3.25% band, its second narrowest August range in three years.
- Brent stayed firm through the month, gaining over 7% in the third week and touching around $94 a barrel on August 20, before easing to near $90 at month end, keeping July’s inflation and import bill risk firmly in play.
- The RBI’s Monetary Policy Committee, meeting August 3–5, unanimously held the repo rate at 5.25% with a neutral stance, its fourth straight hold. It raised the FY27 growth forecast to 6.7% from 6.6% and trimmed the inflation projection to 5% from 5.1%.
Currency & Institutional Flows
- The Indian Rupee stayed under pressure through August, dipping to around 95.55 against the dollar intra month with the RBI intervening to limit depreciation, before firming to settle at 95.39 on August 28, up 6 paise, and closing the month near 95.40 on softer crude.
- Foreign Institutional Investors (FIIs) remained net sellers in the cash market in August 2026, with net outflows of ₹7,531.8 crore, slightly wider than ₹5,779 crore in July. On an all segment basis, however, FPIs were net buyers of roughly ₹27,000 crore, the highest since September 2024 , as heavy IPO participation more than offset secondary market selling.
- Domestic Institutional Investors (DIIs) stepped up sharply, recording net inflows of ₹58,268.25 crore in August 2026, up 66% from ₹35,099.25 crore in July. This surge was the main reason the correction stayed shallow, with domestic money absorbing large-cap selling while flowing into broader-market names
Sector Performance:
| Sector | Return | What Drove It? |
| Metal | +3.77% | Best sector of the month. Commodity strength ran alongside a ~9% surge in gold and silver, with buyers returning to metal names amid geopolitical uncertainty and a weaker rupee. |
| PSU Bank | +2.90% | Sharp turnaround from July’s decline. Strong Q1 FY27 GDP of 7.8% and the RBI’s upgraded FY27 growth forecast of 6.7% supported credit growth expectations. |
| Pharma | +2.50% | Defensive rotation continued amid crude driven volatility, aided by a weak rupee that lifts export realisations. Nifty Healthcare rose a more modest 1.14%. |
| Private Bank | +1.99% | Domestic institutional buying favoured private lenders, with Kotak Mahindra Bank rising 7.46% to rank among the month’s top Nifty gainers. |
| IT | +1.59% | Sharp deceleration from July’s 17% surge as the AI deal driven rally lost steam. The sector held its gains, but leadership rotated decisively elsewhere. |
| Realty | –0.39% | Reversed July’s 9% rally as elevated crude and concerns over US interest rates dampened sentiment toward rate sensitive sectors. |
| Auto | –0.50% | Gave up July’s gains as crude stayed high, reversing the input cost relief that drove the earlier rally. |
| Financial Services | –0.97% | Slipped despite broader bank strength |
| Oil & Gas | –1.19% | Turned negative despite firm Brent near $90–94/barrel, as marketing and downstream margin pressure outweighed gains in upstream names. |
| FMCG | –6.27% | Standout laggard. Input cost inflation in palm oil, crude derivatives and sugar squeezed margins |
Key Economic Highlights:
| Indicator | Latest Data | The Bottom Line |
| GDP Growth (Q1 FY27) | 7.8% YoY | Growth accelerated from 6.9% a year ago and beat the RBI’s 7% estimate, led by services and investment. |
| RBI Repo Rate | 5.25% | Fourth straight hold with a neutral stance; FY27 growth view raised to 6.7%, while inflation forecast was trimmed to 5%. |
| US Fed — Jackson Hole Meet | 66% odds of a Sept hike | Warsh’s hawkish keynote flagged PCE inflation at 3.7% and said financial conditions were “not restrictive,” lifting hike odds from 36% and the 10 year yield to 4.79%. |
| Industrial Production (IIP) | 6.7% YoY | Manufacturing grew 7.3% and capital goods 16.1%, though a mining contraction pulled headline growth lower. |
| Manufacturing PMI | 52.8 | Weakest expansion in five years as new orders slowed and factory employment shrank for the first time in 30 months. |
| Services PMI | 54.5 | Services rebounded from July’s multi year low, offsetting the manufacturing slowdown and supporting job creation. |
| GST Collections | ₹1.99 lakh cr | Up 14.8% YoY, with import revenue surging 29%, keeping the monthly run rate close to ₹2 lakh crore. |
Fundamental Outlook:
- Earnings outlook is improving: Q1 FY27 reduced concerns around an earnings slowdown, but the bar is now higher. FY27 Nifty EPS is expected to grow 14–15%, requiring 16–17% growth over the remaining nine months.
- Inflation risk is returning: Food and energy costs are likely to push inflation higher in the coming months, limiting the scope for further monetary easing and increasing the risk of margin pressure.
- Global rates remain a headwind: Higher US yields and rising expectations of a Fed hike could keep FPI flows and valuation multiples under pressure, particularly for expensive segments of the market.
- Oil remains the biggest swing factor: Elevated crude prices could widen the current account deficit, pressure the rupee and squeeze corporate margins, particularly across consumer and transport intensive sectors.
- Domestic demand remains supportive: Strong credit growth, government spending and improving consumption provide a relatively favourable backdrop for domestic facing businesses, even as global demand remains uncertain.
- Market breadth remains positive: Midcaps and smallcaps have continued to outperform on strong domestic flows, although valuations in parts of the broader market leave less margin for disappointment.
- Key monitorables: Q2 earnings guidance, inflation trajectory, crude prices, FPI flows, US rates, monsoon impact on rural demand and global growth expectations will be the key factors to watch.
Technical Outlook:
- Trend has weakened: Nifty closed at 23,914, down 0.59% from Tuesday’s 24,055.80, breaking below the crucial 24,000–23,950 support zone and August’s low of 23,994, signalling near term weakness.
- Momentum has softened: RSI has cooled from July’s 66.9 into neutral territory and daily moving average signals have turned negative, suggesting limited upside until the index reclaims the 24,100–24,200 band.
- Key levels: 24,000 has flipped from support to immediate resistance, with the 50 day EMA band at 24,150–24,200 the significant hurdle above. Downside support now sits at 23,800, with 23,500 below that as major support.
- Volatility risk has increased: India VIX at 11.59 stays low but is edging higher, while PCR has slipped below 1 from July’s 1.12, showing defensive positioning. The market remains sensitive to crude near $90, US-Iran tensions and the September 16 FOMC.
Overall: The technical bias has shifted from positive to cautious, with 24,000 now the key level to reclaim for the setup to improve.
US Market Outlook:
- Fed outlook has turned hawkish: Markets are pricing around 60–70% probability of a 25 bps hike at the September 15–16 meeting, as renewed inflation concerns and higher energy prices keep rate expectations elevated.
- Earnings remain the key support: With 97% of S&P 500 companies reporting Q2, earnings growth is running at 52% YoY, with 86% beating EPS estimates. Even excluding Alphabet and Amazon, earnings growth remains strong at 33.8%, showing that growth is broadening beyond the largest companies.
- Mag 7 results remain strong, but quality matters: The Mag 7 reported 118.5% earnings growth, partly boosted by investment gains at Alphabet and Amazon. The other 493 S&P 500 companies still delivered 31.8% growth, indicating a healthy broader earnings cycle.
- Earnings expectations remain strong: FactSet expects 28.2% earnings growth in Q3, 25.8% in Q4 and 31.2% for CY2026, with revenue growth expected at 11.9%. Strong earnings remain the main support for equities.
- Valuations are not cheap: The S&P 500 trades at 19.6x forward earnings, close to its 5 year average of 19.9x and above the 10 year average of 19.0x. This leaves limited room for earnings disappointments.
- Near term outlook is more cautious: Rising Treasury yields, with the 10 year yield approaching 5%, along with higher oil prices and renewed US Iran tensions, could pressure valuations despite strong earnings.
Gold Outlook:
- Domestic prices remain elevated: 24K gold is around ₹1,54,090/10g, well above the earlier ₹1,41,946 level. Silver is around ₹2.50 lakh/kg.
- Global gold has corrected: Spot gold is near $4,300/oz, down nearly 9% from its $4,697 three month high, as higher US yields weigh on bullion.
- Fed is the key headwind: September hike odds have risen to around 66%, while the US 10 year yield is above 4.8%, increasing the opportunity cost of holding gold.
- Rupee continues to cushion domestic prices: USDINR is around ₹94.85–95.00, providing some support to domestic gold prices despite the global correction.
- Long term outlook remains positive: Central bank buying and festive demand provide structural support.
Final View:
- Strong earnings, but markets remain cautious: Q1 FY27 delivered one of the strongest earnings performances in recent quarters, but the market has corrected from its highs. This suggests investors are currently focusing more on future risks such as crude, geopolitics, US yields and the monsoon rather than past earnings.
- Broader market earnings remain supportive: Smallcaps and midcaps continue to report stronger earnings growth than large caps, supporting their recent outperformance. However, valuations are relatively higher, making selectivity and company specific fundamentals more important.
- Valuations are more reasonable: The Nifty is trading at around 18.4x earnings, slightly below its long term average. India’s valuation premium over emerging markets has also reduced, improving relative attractiveness.
- Domestic flows remain supportive: FY27 FII outflows are around $8 billion, compared with nearly $34 billion of DII inflows. Domestic liquidity continues to cushion foreign selling, but a sustained return of FII buying would provide stronger support to the market.
- Crude remains the key swing factor: Brent is currently around $90. A move below $85 would be supportive for inflation, margins and the rupee, while a move towards $100 could increase pressure on corporate costs and delay monetary easing.
- Monsoon remains important for rural demand: Rainfall has been below normal through August, with uneven regional distribution. The September rainfall pattern will be important for rural consumption and food inflation.
- Global rates remain a near term headwind: Higher US yields and around 66% September Fed hike expectations could continue to limit foreign flows into emerging markets, including India.
- The overall backdrop remains constructive over the medium term, but near term volatility is likely to remain elevated.
Investors are advised to consult their financial advisors before making any investment decisions. This view does not constitute investment advice.
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