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Below the Quote on FYI - Monthly Equity Outlook by Vinay Paharia, CIO, PGIM India Mutual Fund 

India’s equity market is navigating a complex but promising landscape. After two years of strong performance, the market is currently in a consolidation phase, digesting past gains and recalibrating amid global and domestic shifts. However, we see a clear trend of outperformance of the high quality-high growth strategy, while the basket of low quality-low growth companies and parts of the markets which were in bubble zone are seeing a deceleration and we expect this trend to continue.

While geopolitical and macro-economic events continue to be areas of concern, we believe that India being largely a domestic-oriented economy, will be able to weather the storm with limited impacts. Further, policy measures such as income tax and GST cuts and upcoming pay commission hike for central government employees, could increase disposable incomes and help consumption, which should augur well for overall economic growth. 

August 2025  

The Nifty declined 1.4% in August, with sentiment staying cautious following the implementation of steep US tariffs on Indian goods. Mid-cap and small-cap indices underperformed large-caps and were down 2.9% and 4.1%, respectively. Consumption-oriented sectors saw a rally on the government’s plan for rationalization of GST. Auto and consumer durables sectors were up 5.8% and 2%, respectively. Oil & Gas, Power and Realty were down 4.7%, 4.6% and 4.5%, respectively. India was among the laggards within world markets, along with South Korea (-1.8%) and the Philippines (-1.6%). Shanghai (+8%), Brazil (+6.5%) and Indonesia (+4.6%) were among the top gainers.

Key developments:

(1) The US added an extra 25% duty on top of the 25% imposed earlier this month, citing India’s refusal to stop buying Russian crude and defence hardware,

(2) OPEC announced a significant output hike

(3) The RBI left key interest rates unchanged and maintained a neutral policy stance, signalling caution amid global trade headwinds

(4) S&P Global upgraded India’s sovereign rating from BBB- to BBB while maintaining a stable outlook

(5) The government announced plans to rationalize the extant GST rates

(6) The Federal Reserve Chair signalled that the central bank could begin easing monetary policy next month.

Meanwhile, FPIs continued to be negative and sold US$3.1 bn of Indian equities in the secondary market, whereas DIIs bought US$9.5 bn.

On the economy front:

(1) Consumer Price Index (CPI) inflation decelerated further to 1.6% in July from 2.1% in June,

(2) Wholesale Price Index (WPI) inflation for July was at (-)0.6% YoY (June: (-)0.1%) and

(3) Index of Industrial Production (IIP) growth in July increased to 3.5% from 1.5% in June

(4) Real GDP growth increased to 7.8% in 1QFY26 from 7.4% in 4QFY25. India’s Q1FY26 GDP reported at 7.8% as against 7.4% in Q4FY25, the highest in past six quarters. The massive increment is led by low GDP deflator (0.9% YoY), favourable base, growth in agriculture, services, and government spending

(5)  July 2025 sectoral credit data reflects a marginal improvement in overall non-food credit growth, which increased to 9.9% YoY as compared with 9.3% YoY in June 2025. The uptick was primarily driven by a modest recovery in industrial credit.

Trade deficit in August widened to USD$29.6 bn (versus USD$23.6 bn in July). This was primarily driven by a rise in gold imports (may be due to customs duty cut) from USD$3.1 bn in July to USD10.1 bn in August. Total exports contracted by 9.3% YoY in August from a contraction of 1.7% in July, with non-oil exports growth being flat during the month. Total imports inched up 3% YoY in August (versus 7% in July) while non-oil and gold imports rose 5% YoY.   

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