Three-Month Outlook for Indian Markets:

Navigating Growth Amid Global Headwinds

As we close out November 2025, the Indian equity markets stand at a pivotal juncture. The Nifty 50 has notched a 2% gain this month, closing above 26,000, while the Sensex hovers near 85,700, marking the third consecutive monthly uptick.804df5 This resilience comes after a year of underperformance, with the Nifty up just 5% year-to-date, lagging major global peers due to FPI outflows, elevated valuations, and US tariff uncertainties. Looking ahead to the next three months (through February 2026), we anticipate a cautiously optimistic trajectory, with potential for 4-6% upside in benchmarks, driven by domestic tailwinds and easing monetary pressures. However, volatility could persist from external shocks.

Key factors shaping this view include a robust earnings revival—Q2 FY26 results showed the strongest profit growth in over a year, with consensus projecting 13% expansion for calendar 2025 and 16% in 2026. India's GDP is forecasted at 6.4% for FY26, with Q3 estimates nearing 7%, fueled by capex recovery and GST collections.efde25 Sectors like banking, metals, autos, and FMCG are poised for outperformance, buoyed by rural demand rebound and infrastructure push.

Over the subsequent six months (through May 2026), investors could reasonably expect 8-12% returns on the Nifty, aligning with historical annualized averages of 10-12% and J.P. Morgan's target of 30,000 by end-2026 (implying ~15% from current levels). This assumes sustained domestic inflows—equity mutual funds have infused ₹2.92 lakh crore YTD, offsetting $16.9 billion FPI exits—and a shallow RBI easing cycle with two 25 bps cuts in H1 2026. Earnings pickup in H2 FY26, alongside GST reforms lowering taxes on consumer goods, should support margin expansion and volume growth.

Internal Movers: Domestically, government capex (projected at $23 billion via PLI schemes) and private investment cycles in industrials will drive cyclicals. Declining inflation (within RBI's 4-6% band) enables policy dovishness, boosting credit growth to 15%+. Rural recovery, via better monsoons and agri-schemes, lifts FMCG and autos, while MSME empowerment addresses unemployment at 3.2%.

External Movers: Globally, US Fed cuts (75 bps in 2026) could revive FPI inflows, but hawkish pauses risk outflows if yields spike.575817 Crude oil volatility—amid OPEC+ dynamics—threatens the import bill, while US tariffs on steel/aluminum (up to 25%) hit exports, exacerbating rupee pressure past ₹88/$.5c1833e160db Geopolitical tensions in West Asia add supply risks, but India's inward focus (80% GDP from domestic sources) buffers shocks. Trade deals with UK/US could unlock FDI, countering China+1 shifts.

In this environment, prioritize diversified portfolios overweight on financials (20% allocation) and consumer discretionary (15%), with hedges via gold amid volatility.