Indian equity markets saw significant turbulence in Q1 2026, with the Nifty50 swinging between 21,800 and 23,400. Three macro forces dominated the quarter: FII selling pressure, RBI's stance on rates, and global risk-off sentiment.
FII Outflows
Foreign Institutional Investors pulled out over ₹42,000 crore from Indian equities in January alone, triggering broad-based selling across large-caps. IT and banking sectors bore the brunt of the sell-off.
RBI Policy Pause
The Reserve Bank of India held the repo rate steady at 6.5% in its February meeting, citing sticky core inflation. While a rate cut was widely anticipated, the MPC's cautious tone disappointed markets expecting a dovish pivot.
Global Cues
Rising US treasury yields and a stronger dollar put pressure on emerging markets broadly. However, domestic institutional investors (DIIs) stepped in as consistent buyers, providing support at lower levels.
What to Watch in Q2
With Q4 corporate earnings season approaching and the Union Budget's fiscal roadmap in place, the market focus shifts to earnings delivery. Sectors to watch: infrastructure, defence, and rural consumption — all direct beneficiaries of Budget 2026 allocations.