Equity markets may remain range-bound

Indian equity markets are likely to remain range-bound in the week ahead, with a marginal recovery possible after three consecutive weeks of weakness. The recent decline in crude oil prices and renewed FII buying of Rs 3,276 crore last week (until Thursday) are supporting domestic sentiment. Brent crude has eased to around $88/bbl, down ~8% over the past nine days, providing some relief, although geopolitical developments around Iran and the Strait of Hormuz remain key monitorable.Among global cues India GDP, China, US, EU and UK Manufacturing & Non-Manufacturing PMI and US unemployment data would be key macro data to be monitored this week. The market is likely to remain driven by stock- and sector-specific opportunities amid a mixed global backdrop.Last week, Nifty 50 declined around 0.5% week-on-week. Broader markets were relatively more resilient, with the Nifty Midcap 100 gaining around 0.4% and the Nifty Smallcap 100 rising around 0.5%. Sector performance remained mixed, with metals, capital-market stocks and pharmaceuticals among the better performers, while FMCG and autos remained under pressure.On the macro front, Q1 FY27 GDP data, scheduled to be announced on August 31, will be a key market trigger. Economists expect growth to remain resilient at around 7–7.3%, despite some moderation from the previous quarter. Strong domestic demand and government spending are expected to support growth, while weaker private investment and the impact of the West Asia conflict remain key risks.Equity markets likely to see upmove as Q1 earnings season gathers paceNBFCs are showing signs of a broad-based recovery following a strong Q1 FY27 earnings season. Loan growth has improved, asset quality has strengthened and margins have remained resilient, while better operating efficiency is beginning to support profitability. Motilal Oswal expects profits for its NBFC coverage universe to grow 24% in FY27 and 18% in FY28. The recovery is broadening beyond vehicle finance to housing, gold, MSME and other retail lending segments. However, a weaker monsoon, geopolitical risks and the possibility of higher interest rates remain key risks.The textile sector also delivered a strong Q1 FY27, with revenue growth of around 18% across the sector, supported by higher order execution and a favourable base. Spinning companies reported 15–20% revenue growth, high-capacity utilisation and improving cotton-yarn spreads, while margins also improved. Supply-chain diversification away from China and stronger export opportunities could support the sector over the medium term. However, cotton prices, freight costs and export demand will remain key monitorables.The government continues to support domestic electronics and battery manufacturing. A proposed Rs 13,000 crore incentive programme for advanced battery components aims to reduce India’s dependence on Chinese imports and strengthen the domestic battery supply chain. Separately, the government has approved a Rs 62,500 crore Mobile Phone Manufacturing Scheme for FY27–FY31, offering incentives of 2.25–5% on eligible sales, with additional incentives for local sourcing. The scheme favours large manufacturers with scale, exports and greater local production, making Dixon Technologies one of the better-positioned beneficiaries.(The writer is Head of Research, Wealth Management, Motilal Oswal Financial Services Ltd)

Source: Deccan Herald