Indian equity markets are entering Samvat 2083 with domestic economic fundamentals offering some support, but geopolitical uncertainty, crude oil prices and foreign investor activity are expected to keep volatility elevated. Analysts believe the new Samvat could bring uneven market returns, with the direction of equities depending largely on developments in West Asia, global interest rates and the ability of companies to deliver earnings growth.
The previous Samvat ended on a strong note, with the Nifty 50 and Sensex registering weekly gains of 8.6-8.8 per cent, their biggest in nearly six years. The rally came amid a Democratic victory in the US midterm elections and an unwinding of the artificial intelligence (AI) trade.
The improvement in global sentiment also brought some relief to commodity and bond markets. Brent crude oil prices cooled to $98.3 a barrel on Friday, while the yield on the US 10-year Treasury bond fell to 4.86 per cent from a multi-year high of 5.37 per cent.
However, the outlook for oil remains uncertain. The US Energy Information Administration's October outlook projected Brent spot prices to average $84 a barrel in 2027, assuming that most West Asian oil production returns to pre-conflict levels by June next year.
The EIA has cautioned that this projection is conditional. Any escalation, including attacks on oil tankers, could change the situation rapidly and make existing forecasting models ineffective.
Geopolitical developments and crude prices remain key triggers
A reduction in geopolitical tensions could provide considerable relief to Indian markets, given the country's dependence on imported energy.
U R Bhat, co-founder and director of Alphaniti Fintech, said a de-escalation of the US-Iran war could bring oil prices down by 30-40 per cent, benefiting India. A resolution of the Russia-Ukraine conflict could further improve global investor sentiment.
Bhat also pointed to the possibility of a correction in stretched AI valuations. Such a reversal could trigger an anti-AI trade, potentially redirecting global investment flows towards Indian markets.
He added that domestic indicators, including economic growth, Goods and Services Tax (GST) collections and corporate earnings, had remained encouraging. However, he said a sustained market rally would require foreign portfolio investors (FPIs) to resume buying or at least reduce the pace of their selling.
Overseas investors offloaded a record Rs 4.55 trillion worth of Indian equities during Samvat 2082. Domestic institutional investors (DIIs), meanwhile, provided support to the market by purchasing shares worth Rs 8.55 trillion.
The ability of domestic institutions to absorb foreign selling has therefore remained an important source of stability. Whether this support can continue to offset overseas outflows will be closely watched in the new Samvat.
Foreign investors remain cautious on Indian valuations
The broader outlook among international investors is cautiously positive for 2027, with a more favourable assessment of India's long-term prospects. Their near-term positioning, however, remains restrained because of concerns over valuations and earnings growth.
In a November 5 note, HSBC Private Bank said it continued to maintain a tactical mild underweight position on Indian equities. It noted that Indian stocks had outperformed global and Asia ex-Japan equities in October, but valuations remained a concern.
According to the bank, the MSCI India index was trading at more than twice the price-to-earnings (P/E) ratio of Asia ex-Japan equities, despite potentially slower earnings growth in 2027. This, it said, reduced the likelihood of sustained outperformance.
HSBC said it preferred defensive, domestically oriented large-cap companies, with financials and industrials among its preferred sectors.
BlackRock, in a report released on October 26, struck a more balanced position. It favoured an above-benchmark allocation to Indian equities in strategic portfolios with an investment horizon of five years or more, while maintaining a neutral tactical stance.
The investment firm said large-cap valuations remained expensive compared with regional peers and earnings prospects varied across the market. It expected stock-specific performance to become increasingly important, with returns driven more by companies' ability to deliver earnings.
Large-caps and earnings growth in focus
The performance of different market segments during Samvat 2082 highlighted the divergence between benchmark indices and broader markets.
The Sensex and Nifty 50 declined 4 per cent and 3.1 per cent, respectively, over the period. In contrast, the Nifty Midcap 100 gained 2.1 per cent, while the Nifty Smallcap 100 advanced 4.2 per cent.
Analysts consulted by Business Standard said their base-case scenario for Samvat 2083 involved uneven but lower crude oil prices, higher interest rates and equity returns increasingly supported by corporate earnings.
The bullish scenario assumes lower inflation and improved profitability for banks and large companies. A more favourable energy-price environment could ease cost pressures, while stronger earnings would provide support to valuations.
The bearish scenario, on the other hand, involves crude oil prices remaining elevated, further weakness in the rupee and downgrades to corporate earnings estimates. Such a combination could put pressure on market sentiment and delay a sustained recovery.
Additional brokerage assessments also point to the importance of earnings delivery and domestic liquidity. SBI Securities, in its Samvat 2083 outlook, expected a gradual market recovery after nearly two years of consolidation, citing resilient domestic institutional flows and the prospect of double-digit earnings growth. It also identified crude prices, the rupee, inflation, global bond yields and foreign investor activity as important factors to monitor.
Motilal Oswal Financial Services similarly expects earnings growth to improve in FY27 and FY28, while recommending selective stock-picking rather than indiscriminate exposure across market segments. Its preferred themes include banking and financial services, manufacturing and consumption.
Banks and financials emerge as preferred bets
Despite the differing scenarios, analysts broadly see banks and financial services as among the most promising sectors in the new Samvat.
Financial institutions could benefit from domestic economic activity and credit demand, while large companies with strong balance sheets and consistent earnings may be better placed to navigate market uncertainty.
The preference for financials also reflects the broader view that investors should focus on companies with relatively predictable earnings rather than rely solely on a broad market rally.
With crude oil prices, geopolitical developments, foreign capital flows and interest rates likely to influence sentiment, Samvat 2083 is expected to reward selective investment decisions. The strength of domestic fundamentals could provide a cushion, but a sustained rally will depend on improving earnings and a more supportive global environment.