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Below Quote on Weekly Market Outlook 02nd April 2026 - Motilal Oswal Financial Services – Wealth Management 

Indian equities are likely to remain volatile this week, with investor sentiment closely tied to evolving developments in the ongoing West Asia conflict. While the US continues to assess its response to potential actions on Iran’s energy infrastructure, recent comments from US President Donald Trump indicate a more assertive stance—warning of possible military action if negotiations fail, while still leaving room for diplomacy. Continued escalation, however, is keeping global risk appetite fragile. Reflecting this uncertainty, Brent crude prices have remained elevated (near ~USD 107 per barrel), sustaining concerns around imported inflation. Currency pressures have also intensified, with the Indian rupee weakening sharply towards record-low levels against the US dollar before recovering towards ~Rs.93, aided by active RBI intervention. The central bank has reportedly intervened through both spot dollar sales and forward market operations, helping smooth volatility and prevent disorderly depreciation. Foreign institutional investor (FII) selling remains another key overhang, as March month saw intense selling of Rs.1.2 lakh crore - marking one of the highest monthly outflows in the last several years. Against this backdrop, global macro indicators will be closely tracked. Investors will monitor US FOMC meeting minutes, GDP data, initial jobless claims and CPI prints for cues on growth and the policy trajectory. Domestically, the RBI’s upcoming rate decision assumes added significance, particularly in the context of elevated crude prices and imported inflation risks. While growth remains resilient, the central bank may retain a cautious stance, balancing inflation risks with liquidity conditions.

Importantly, the onset of the Q4 earnings season is likely to add another layer of volatility. The March quarter was impacted by currency depreciation, elevated input costs (particularly crude-linked) and uneven global demand, which could lead to divergent sectoral performance and stock-specific reactions. Tata Consultancy Services (TCS) is scheduled to report on 9th April, setting the tone for the IT sector and broader earnings season.

Markets ended last week on a subdued note, with the Nifty50 declining 0.5%. Broader market performance was mixed, with the Nifty Midcap100 falling 0.8% while the Nifty Smallcap100 gained 0.2%, indicating selective risk appetite. Sectoral performance remained mixed, with IT (+2.6%) emerging as the top gainer, followed by metals (+1%), while PSU stocks (-5.2%) and consumer durables and financial services (-4.1%) lagged. At a sectoral level, elevated crude prices continue to have a cascading impact on the oil & gas ecosystem. Recent policy measures—including excise duty cuts on auto fuels and export levies on refined products—offer partial support to oil marketing companies, although under-recoveries remain sensitive to crude movements. The waiver of duties on petrochemical feedstocks is a key positive for sectors such as paints, chemicals, packaging and select consumer industries, where input costs are closely linked to crude derivatives. This provides a meaningful margin cushion for downstream players, partially offsetting broader cost pressures. Geopolitical tensions are also reflecting in the defence sector, where rising security concerns have accelerated policy action. The Defence Acquisition Council’s approval of proposals worth ~Rs.2.4 trillion underscores the government’s continued push to strengthen domestic capabilities. Alongside this, defence exports have reached record highs, reflecting improving global competitiveness. The increasing focus on indigenisation is expanding opportunities for domestic players, enhancing revenue visibility and reducing external dependencies. While near-term execution challenges persist, the structural outlook remains favourable. In contrast, the IT sector continues to navigate a moderating demand environment, although recent buying interest suggests improving comfort on valuations. Q4FY26 earnings are expected to remain stable, with large-cap companies likely to report revenue growth in the range of -1% to +1.5% QoQ (constant currency), while mid-tier players continue to outperform. Margins are expected to remain range-bound, supported by currency tailwinds but offset by wage hikes and productivity pressures. While concerns around AI-led disruption and subdued discretionary spending persist, the direct impact of geopolitical tensions on the sector remains limited, with resilient BFSI demand offering some support.

Overall, markets are expected to remain volatile as geopolitical developments, crude price movements, FII flows and global macro data continue to drive sentiment. The combination of external uncertainty and the onset of a potentially mixed earnings season could keep volatility elevated in the near term. Any signs of de-escalation in the West Asia conflict may provide relief through softer crude prices and currency stability, while further escalation could prolong risk aversion and sustain pressure on foreign flows.

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