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Global Markets and Economy

Global Indices 1m Returns (local currency)

• Global markets ended June on a mixed note as AI-driven optimism moderated, prompting a rotation away from richly valued technology stocks.

• Hong Kong was the weakest performer as persistent concerns over China's weak domestic demand, property sector slowdown and deflation weighed on mainland-linked stocks.

• India's Nifty 50 rose 1.35%, supported by resilient domestic fundamentals, steady institutional inflows and improving investor sentiment despite an uncertain global backdrop.

• Global inflation has turned stickier in recent months, with price pressures re-emerging across major economies, led by the US and the Eurozone, while India also witnessed an uptick.

• Consequently, central banks have largely maintained a cautious policy stance, prioritizing inflation control over growth support, even as China continues to pursue accommodative policies amid subdued domestic demand.

Indian Economy

• India’s Q1 2026 GDP grew a stronger-thanexpected 7.8%, led by robust investment activity and resilient private consumption, underscoring the economy's strong domestic growth engine.

• Growth quality improved, with manufacturing and services driving expansion, reflecting increasing support from private sector demand and capital expenditure.

• While FY26 growth remained strong at 7.7%, FY27 is expected to moderate amid higher crude prices, geopolitical risks, monsoon uncertainty and potential inflationary pressures.

India GDP Growth Rate

India's manufacturing activity moderated in June, with the PMI easing to 54.2 as growth in output, new orders and exports softened amid weaker demand. While easing input cost pressures reduced pricing pressures, business confidence slipped to a five-month low, reflecting concerns over demand and the broader market outlook.

India's services activity moderated in June, with the PMI easing to 57.4 as output and new order growth softened. Export demand remained resilient, while easing input cost inflation helped contain price pressures. However, employment declined and business confidence weakened amid a softer demand outlook.

• Brent crude declined sharply during June, ending the month near US$72/bbl after easing geopolitical tensions, the US–Iran ceasefire, improved shipping through the Strait of Hormuz and a better-than-feared global supply outlook unwound the wardriven risk premium.

• Gold weakened over the month as cooling geopolitical risks, falling oil prices and expectations of a higher-for-longer US Federal Reserve stance reduced safehaven demand and supported the US dollar.

• The rupee strengthened modestly against the US dollar during June, aided by easing crude oil prices, improving global risk sentiment and supportive RBI-Government measures to bolster foreign capital inflows and external sector stability.

• Indian equities extended their gains in June, with the broader market outperforming as easing geopolitical tensions, softer crude prices and resilient domestic macroeconomic data improved investor sentiment.

• Broader markets, led by Small Cap, benefited from renewed risk appetite.

• Rate-sensitive sectors such as Private Banks, Banks and Realty outperformed on expectations of improving credit growth and lower funding costs. In contrast, IT and Metals lagged amid fading AI-driven optimism, weaker global demand and softer commodity prices.

• Nifty valuations have corrected further in the recent selloff, deepening the valuation comfort.

• The setup strengthens the long-term investment case, as improving earnings outlook, scope for FII reentry, and strong domestic flows position markets for earnings-led compounding rather than valuation expansion

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