Indian stock markets are likely to open on flat to negative note on Monday despite a strong closing on Friday. Analysts said the focus has now shifted to Q2 results by India Inc and inflation numbers. The focus will also be on monsoon progress.
According to Ajit Mishra, SVP – Research, Religare Broking, While the 25-basis-point rate hike was broadly in line with expectations, the shift from a neutral stance to calibrated tightening raised concerns about borrowing costs and the possibility of further policy action. However, the upward revision in the FY27 GDP growth forecast reinforced confidence in the resilience of the domestic economy.
“Global cues continued to influence market sentiment. Elevated US Treasury yields, uncertainty surrounding the Federal Reserve’s policy trajectory and geopolitical risks kept investors cautious. Crude oil prices remained a key variable, given their implications for India’s import bill, inflation, corporate margins and the rupee. Persistent FII selling further weighed on sentiment,” he said.
Gift Nifty is ruling at 22,646 signalling a flattish opening for the week.
Emkay‘s outlook and Q2 analysis
Meanwhile, domestic brokerage Emkay Global Research said, mid global uncertainties, including West Asia tensions, trade tensions, and spiking DM bond yields, Indian corporate earnings look impressive in 2QFY27. Emkay coverage is likely to deliver 24.8% topline and 21.6% PAT growth, against 21.9% for the Nifty (excluding BFSI), led by Industrials, Metals, and Energy, with the latter benefiting from a weak base. “Earnings breadth is narrowing, with the share of companies delivering PAT growth above 10% falling to 54% from 67%. Demand recovery continues but margins and 2HFY27 commentary warrant monitoring as the GST 2.0 base effect turns adverse. The Nifty trades at 15.5x 1YF PER for FY28E, well below -1SD, with 36% of coverage below -1SD vs 24% last quarter, providing valuation comfort,” it said..
However, macro headwinds dominate with Brent at $101/bbl and a 204bps India-US 10Y yield differential weighing on the CAD, rupee, and FPI flows, contributing to the ~10% correction since 1-Aug-26, it said adding “We remain constructive on equities and set a Sep-27E Nifty target of 27,000 at 18.8x 1YF PER, implying 20% upside, as the healthy domestic setup, cleaner corporate and financial sector balance sheets, well-managed government accounts, sustained economic growth, and reasonable corporate earnings come into play once geopolitical tensions subside and rising DM yields stabilise.”
Key Events to Watch
Investors will track September CPI and WPI inflation data for cues on price pressures following the RBI’s recent rate hike and shift towards calibrated tightening. The Q2 FY27 earnings season will also gather momentum, with HCL Technologies, Hero MotoCorp, Tech Mahindra, Wipro and Nestle India scheduled to announce results. Corporate guidance and commentary on demand and margins will be key to assessing the earnings outlook.
Hariselvan Radhakrishnan, Founder & CEO of HST Wealth, said eptember CPI inflation will be the first major domestic test next week. “A stronger-than-expected reading could revive concerns over further RBI tightening, putting rate-sensitive sectors such as banking, automobiles and real estate under pressure while raising the risk of a broader drag on consumer demand. A softer print could ease concerns over the eventual peak in interest rates, but any relief may prove short-lived if Brent crude remains above $100 a barrel. Wholesale price inflation data will offer a further indication of how elevated energy and logistics costs are filtering through to producer prices,” he cautioned.
The IT sector will remain in focus as HCL Technologies, Wipro and Tech Mahindra report their September-quarter results. The sector staged a sharp rebound on Friday following TCS’s better-than-expected earnings, but whether the recovery gains traction will depend on the performance of its peers and their outlook for the coming quarters. Management commentary on U.S. discretionary spending, deal conversions and margins will be key, alongside the potential implications of the PERM suspension. While the restriction does not affect existing H-1B employment, a prolonged freeze could increase localisation and employee-retention costs for Indian IT companies.
On the flows front, FIIs stayed net sellers for the eighth straight week, offloading a heavy Rs. 30295 crore. DIIs extended their buying streak with net purchases of Rs. 30310 crore fully absorbing the FII selling and enabling Friday’s pullback.
Pabitro Mukherjee, Deputy Vice President-Research, Bajaj Broking, said Going ahead, relentless FII selling and global headwinds are likely to keep markets volatile, though record domestic institutional buying should continue to limit the downside. Market participants will closely track US and Indian inflation data, US bond yields, Brent crude prices and developments in US-Iran geopolitical tensions in the coming week.