Monthly Investment Outlook - August 2026

Indian markets remained resilient over the past month, supported by strong corporate earnings, strong domestic growth and an improving macro backdrop. The RBI upgraded its growth outlook, while foreign investors returned as net buyers of Indian equities. This month, we examine how these developments are shaping markets and how we are positioning portfolios in response.

Indian equity markets delivered positive returns over the past month with Nifty 500 gaining 1.9% between mid‑July and early August. Strong quarterly corporate earnings with good breadth have underpinned the strength in equities. RBI measures to support the rupee have helped to reduce the macro risks. Banking system remains strong with robust credit growth and ample liquidity in the system. Globally, equities remained resilient, as steady growth expectations offset uncertainty around interest rates and geopolitical developments. In fixed income markets, Indian government bond yields ended marginally higher from 6.73% in mid‑July to 6.77% by early August. June CPI inflation increased to 4.38%, driven mainly by food and fuel prices, while core inflation remained relatively contained. At its August meeting, the Reserve Bank of India kept the repo rate unchanged at 5.25% and maintained a neutral stance. The central bank raised its FY27 growth forecast to 6.7% and lowered its inflation projection to 5.0%, reflecting confidence in domestic growth alongside continued vigilance on inflation. RBI’s monetary policy stance remains balanced but supportive towards growth.

The Q1 FY27 earnings season has reinforced the resilience of corporate India despite an uncertain macro backdrop. Earnings growth has remained healthy across most sectors, with domestically oriented businesses continuing to outperform globally sensitive segments. Financial, industrial and consumer-linked sectors have delivered health profit growth. Management commentary has remained constructive despite ongoing uncertainty around input costs and commodity prices. Analysts continue to be bullish for corporate earnings with earnings revisions improving.

Investor participation remained supportive. Foreign investors returned as net buyers of Indian equities in July after four consecutive months of selling, marking an improvement in sentiment toward domestic assets. Domestic institutional investors continued to provide steady support, while foreign participation in debt markets remained constructive following policy measures aimed at improving capital inflows and supporting external stability.

Source: Bloomberg,
Data: As of 10th August 2026

Our positive view on Indian equities continues. Strong Q1 FY27 corporate earnings, resilient domestic demand and improving macro backdrop enhance our conviction. RBI’s balanced policy stance, including an upgrade to its growth forecast and a lower inflation projection, also supports the outlook. However, we continue to look around the corners for pockets of risk so we can react quickly. Geopolitical uncertainty, volatile crude oil prices, increase in global interest-rates and weak monsoon season warrant slight caution too.

Within equities, we continue to favour mid-caps which continue to be supported by healthy earnings growth, improving earnings expectations and greater exposure to domestic demand. While large-cap earnings have also remained resilient, relative momentum across parts of the segment is more moderate. Small-caps have delivered strong earnings and market performance, but elevated valuations need to be watched.br>
Within fixed income, our preference for shorter-maturity investments remains unchanged. The benchmark 10-year government bond yield ended marginally higher over the past month, as support from foreign participation and the RBI’s steady policy stance was offset by crude-oil volatility, global yields and inflation uncertainty. Weak monsoon and increase in global bond yields continue to be overhang for longer-maturity bonds. Shorter-maturity fixed income securities continue to offer a better balance between income generation and capital stability.


Thank you for reading our August 2026 Investment Outlook. We look forward to sharing our latest market perspectives with you again next month.

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