Domestic markets are likely to open on a positive note on Monday, after an emphatic win by the NDA-led government in Bihar assembly elections turned the domestic sentiment positive. Gift Nifty at 26,020 indicates a gap-up opening of about 75-80 points for Nifty. However, global markets are sending a cautious signal.
With the result season coming to an end, analysts expect the macro factors to anchor market direction.
Motilal Oswal Financial, analysing Q2 results, said theQ2 FY26 earnings have generally been in line with our expectations, with the intensity of earnings cuts moderating.
“Although Indian equities have registered a lacklustre performance over the past one year, we continue to emphasise that the Indian markets now appear healthier compared to last year. The earnings cycle is bottoming out, with growth expected to accelerate into double digits. Valuations remain reasonable, with the Nifty trading at 21.2x, near its LPA of 20.8x,” it said. Any signs of accelerating earnings growth should support valuation expansion.
“We believe that the cavalry of measures by the government will help reset the trajectory of corporate earnings, as domestic reforms are expected to continue. Additionally, any resolution of the tariff stalemate will be a key external catalyst, in our opinion. Our model portfolio is more aligned towards domestic names, driven by expectations of a domestic economic rebound. While SMID stocks trade at expensive valuations, we continue to focus on this segment, selectively picking high-conviction SMID names in our portfolio,” the report added.
Analysts expect the momentum to continue as most of the negative triggers are factored in. Stable inflation, resilient consumer demand, a steady monetary policy backdrop, and strong DII inflows continue to underpin the market’s positive momentum, said Ponmudi R, CEO of Enrich Money. However, the global environment remains delicate. Sharp sell-offs in major US tech stocks, soft investment data from China, and weakness across European markets are keeping global investors cautious. China’s slowing growth is particularly notable given its outsized influence on global demand, and this ongoing turbulence heightens the risk of foreign capital outflows from emerging markets including India, he cautioned.
From an institutional perspective, FIIs offloaded around ₹12,020 crore in equities during the week, whereas DIIs recorded strong net inflows of ₹24,674 crore, offering meaningful support to the market and helping maintain a constructive undertone despite broader volatility, said Puneet Singhania, Director of Master Trust Group
Manoj Purohit, Partner & Leader, Financial Services Tax, Tax & Regulatory Services, BDO India, said foreign inflows have witnessed continuous volatility with some sign of recovery in coming times. Major factors contributing to this positive shift are the record domestic sales during this festive month, sustained corporate earnings growth, and ongoing talks on India-US trade deals. Regulators are also playing a pivotal role to ensure that the concerns of the offshore investor fraternity on easing regulatory parameters and compliance burden are put in place to ease access into the India market and deepen market participation.
SEBI’s key proposal announcements include aligning KYC review timelines with RBI norms, eliminating the need for trading and demat accounts, and removing requirements to furnish investor group details for certain categories. Broadening the limits for anchor investor participation, permitting retail schemes in IFSCs with a resident Indian sponsor or manager to register as FPIs are also some of the key measures. “Further, the SEBI has also recently launched a single-window digital platform – ‘India Market Access’ for providing all the required information on India market and regulations for the international institutions eyeing India capital market as a preferred destination for making portfolio investments. The changes aim to reduce administrative burdens, encourage greater participation, and align India’s regulatory environment with the global best practices,” said SSWS.
Yet, NSE derivative trading indicates a cautious approach.
The current derivatives landscape indicates a mildly cautious yet constructive undertone. Call writers have been actively building positions at nearby strikes, whereas put writers are accumulating interest at lower levels — signalling a consolidation phase with an upward tilt, said Dhupesh Dhameja, Derivatives Research Analyst, SAMCO Securities.
“A substantial open interest buildup of nearly 1.50 crore contracts at the 26,000 call strike underscores its importance as a major resistance ceiling. Meanwhile, strong put OI of about 90.86 lakh contracts at the 25,500 strike reaffirms a firm support base. Simultaneous additions in both call and put writing reveal balanced positioning with a positive bias, suggesting expectations of range-bound trade. The Put-Call Ratio (PCR) cooled to 0.79 from 1.03, reflecting a cautious sentiment as participants maintain short positions with increasing conviction,” he added.
Meanwhile, Asian stocks are moderately down in early deal on Monday.