Equities gained in November on festive demand and supportive global cues

Indian equities recorded a third consecutive month of gains in November, supported by firm domestic inflows and a stronger-than-expected Q2FY26 earnings season. The Nifty rose 1.9% during the month, aided by robust festive demand and favorable developments around the India–U.S. trade discussions. Broader market performance was mixed, with midcaps edging higher while small caps declined. Global sentiment remained uneven, though U.S. markets recovered mid-month as labor market data pointed to a cooling trend. In India, earnings surprises— particularly in banking, where funding costs eased more than anticipated—contributed to overall market stability.

Indian equities rallied for the third month in a row for November, with the Nifty up by 1.9% for the month. Sentiments were buoyed due to positive news flow around the India–U.S. trade deal, a vibrant festive season and better than expected Q2FY26 results season. Broader markets were however mixed with the Nifty Midcap 100 closing up by 2.0% while the Smallcap 100 index fell by 3.0% in November. While FIIs remained sellers for the month Domestic flows accelerated month on month which helped support market breadth and sentiment. U.S. markets were volatile in November and sold off in the first half of the month as the Fed chief had indicated that a rate cut in December was not a done deal citing stubborn inflation. However, the reopening of the U.S. government following the brief shutdown helped restore near-term economic clarity, while the latest payroll data indicated cooling labour market conditions without signalling a hard landing.

Moreover, few of the FOMC members including the New York Fed president (and FOMC vice chair) John Williams voicing their concerns over a cooling labor market, led to Markets pricing in increased probability of a 25bps rate cut in the Dec FOMC meeting. This resulted in the U.S. markets recovering most of the losses with the S&P 500 registering marginal gains of 0.1% while the Nasdaq closed down by 1.7% for the month.

Back home, the Q2FY26 earnings season—though muted in absolute terms— has exceeded expectations. Key positive surprise was the lower-than-expected NIM compression for most banks due to larger than expected decline in cost of funds which offset lower yield on assets to a large extent. Though temporary deferral in consumer demand post GST rate cuts announced in early September had an adverse impact on the Q2 numbers for few sectors like consumer durables and Auto, management commentary was positive pointing to sustained demand recovery going forward.

While the Nifty is consolidating near the all-time high levels, delay in the U.S. India trade deal is weighing on markets. However, possibility of further rate easing by the U.S. Fed and the Reserve Bank of India, combined with improving corporate earnings, continues to anchor market confidence.

The Nifty 50 index is currently trading at ~23.9x FY26 (10Y avg: 20.4x) and ~20.7x FY27 (10Y avg: 17.3x) vis-à-vis consensus EPS. The recent run-up of Nifty has left limited room for rerating, so index returns from here are expected to be commensurate with earnings growth.

We continue to maintain our preference for large caps given better risk adjusted returns. Our preferred sectors are large banks, auto, insurance, real estate, chemicals, and capital goods. We remain underweight on mid-cap IT, and upstream oil& gas.

Disclaimer : This content is only for informational purpose. It does not make any recommendation to act or invest.

Source: HDFC Tru (www.hdfc-tru.com) ; Email : tru@hdfcsec.com Phone: 9930203944

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