EF Digest - August 2026

Dear Investors,

Benchmark indices (Sensex and Nifty) clocked gains for the second consecutive month in July 2026. Both Sensex and Nifty closed above important sentimental levels of 85,000 and 24,000 respectively. Even though Sensex and Nifty gained 2%, there were spurts of volatility in the market as the ceasefire between the US and Iran broke down. The broader market underperformed the frontline indices. While Nifty Next 50 TRI (large cap stocks ex Nifty) outperformed Nifty. But midcaps and small caps underperformed versus large cap stocks. Most industry sectors were in the green in May. IT, Consumer Durables, Realty, Automobiles and Healthcare outperformed the broad market index in July. Infrastructure, Power, Capital Goods, Telecom and Banks underperformed in July. FIIs turned net buyers after 3 consecutive months of sell-off. FIIs made a net purchase of Rs 20,000 crores in July. Mutual funds continue to support Indian equities with net purchases of nearly Rs 18,500 crores.

The global market sentiment was weak. US 10-year Treasury Bond yields surged as crude prices rose after the ceasefire between the US and Iran broke down. Attacks on tankers in the Strait of Hormuz have led to the virtual closure of one of the busiest shipping lanes for oil and gas supplies. US market was weak, with Dow Jones and S&P 500 remaining flat. Tech stocks crashed as chip stocks tumbled due to concerns about AI spending versus short-term revenues and intensifying competition from China. NASDAQ was down 7% in July. Among other developed markets, FTSE (UK), DAX (Germany) and CAC (France) rose in July, while Nikkei (Japan) ended in red. Emerging markets underperformed versus developed markets. Shanghai Composite (China) was down 6.4%. India outperformed in the emerging market basket. If India continues to outperform the emerging markets, we see higher FII flows in the future.

The RBI MPC maintained the repo rate at 5.25%, retaining a neutral stance. The US 10-year Treasury Bond yields surged as crude prices rose after the ceasefire between the US and Iran broke down. However, yields declined when the US stopped strikes on Iran. The 10-year G-Sec firmed up by 8 bps, and the 364-Day T-Bill yield firmed by 9 bps. Gold prices remained firm, with prices rising by 1% due to demand for safe-haven assets as geopolitical uncertainty persists. Silver prices declined by 3%. The INR weakened further against the US Dollar. Crude oil prices surged and then settled at around $85 a barrel after the US stopped strikes on Iran.

SEBI has introduced a new framework for determining the closing prices in the F&O segment. In the new system, F&O trading will end at 3:15 PM. From 3:15 PM to 3:35 PM, the exchange will match buy and sell orders to determine single equilibrium closing prices for all stocks in the F&O segment. This system, known as the Closing Auction System, will make price discovery more efficient.

Valuations seem reasonable at the broad market level. Nifty PE ratio is below the long-term historical (13-year) average valuation spanning multiple investment cycles. Nifty 50 earnings growth seems to be catching up with valuations as Q1 earnings growth of Nifty 50 companies beat the Street estimates. Valuations have also come down across broader market cap segments, especially in large and midcap segments. The overall economic and market environment is uncertain. However, current valuations provide attractive entry points for long-term investors. The market trend is bullish. However, we may see spurts of volatility due to geopolitical risk factors. Q1 FY 27 earnings season began on a strong note as many companies reported strong revenue and net profit growth. Earnings growth needs to catch up with valuations in the broader market for the broader market rally to be sustained. The long-term India Growth story is intact despite short-term underperformance. India’s consumption-oriented economy, rising per capita, and favourable demographics make India’s economy even more dynamic in a geopolitical climate. In the long term, Indian companies are likely to benefit from the structural reforms made by the Government, e.g., Atmanirbhar Bharat, Make in India, Digital India, Atal Innovation Mission, Defence sector reforms, labour law reforms, etc. Investors should continue to invest through SIPs in mid and small caps, with a long investment horizon.

Assuring you of our best services.

Best Wishes,

Ajoy Agarwal,

(Managing Director)