New Delhi : The Indian equity market August performance was bolstered by domestic institutional investors’ buying and GST reforms, even as foreign investors continued to exit. Analysts see this as a sign of resilience amid global economic uncertainty.
DIIs infused $10.8 billion, offsetting the FIIs’ $4.3 billion sell-off, which restricted the market to a modest correction in August, with the Sensex and Nifty down 1.5 per cent and 1.2 per cent, respectively, according to HSBC Mutual Fund.
Q1FY26 GDP data surprised at 7.8 per cent year-on-year (YoY), supported by strong services and manufacturing, and CPI moderated to 1.6 per cent in July, the lowest in over eight years, which supported the buying activity in the market.
The auto sector outperformed, benefitting from GST rate cuts, whereas oil and gas, power and real estate lagged.
S&P upgraded India’s sovereign rating to BBB (Stable) from BBB–, a first in nearly two decades, also giving a boost to the equity market in the month.
Meanwhile, mid and small caps fell more sharply (–2.8 per cent and –3.6 per cent, respectively).
The US decision to impose a 50 per cent tariff on Indian goods weighed on currency, equity and bond markets. Indian currency weakened while yields hardened on fiscal concerns, the report said.
Fiscal deficit target of 4.4 per cent of GDP is expected to be met, though weak tax collections and GST rationalisation will pose some risks.
The report emphasised that the RBI has front-loaded 100 basis points of rate cuts in 2025, and is now likely to pause.
Meanwhile, liquidity remains ample, supporting shorter-end yields in the debt market.
Despite global trade headwinds and tariff pressures, India’s macro fundamentals remain resilient with strong GDP growth, benign inflation, and a supportive policy backdrop, the report noted.
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