The Month that was : August 2025

Indian equity markets ended lower in August, with the Nifty 50 Index declining by 1.4%. Broader markets underperformed as mid-cap and small-cap indices fell by 2.9% and 4.1%, respectively. Sectoral performance was mixed consumption driven sectors gained on optimism around potential GST rationalization, with autos and consumer durables rising by 5.8% and 2%, respectively. In contrast, oil & gas, power, and realty saw declines of 4.7%, 4.6%, and 4.5%, respectively.

Globally, India was one of the most underperforming markets during the month, alongside South Korea and the Philippines. On the other hand, Shanghai, Brazil, and Indonesia emerged as top gainers.

Sentiment remained cautious amid rising trade tensions as the US imposed additional tariffs on Indian goods, citing energy and defense ties with Russia. Other key developments included RBI keeping rates unchanged with a neutral stance, and the US Federal Reserve signaling potential monetary easing in September meeting. S&P Global upgraded India’s sovereign rating from BBB- to BBB with a stable outlook, while the government announced plans to rationalize GST rates to boost consumption.

FIIs sold USD 3.1 billion of equities while DIIs bought USD 9.5 billion during the month. On the economic front, inflation trends remained favorable with CPI easing to 1.6% in July from 2.1% in June and WPI slipping to -0.6%. IIP growth was 3.5% in July vs 1.5% in June, while GDP growth strengthened to 7.8% in 1QFY26 from 7.4% in 4QFY25.

Market Outlook:
Markets remain volatile as global trade tensions weigh on investor confidence. While domestic macro indicators such as moderating inflation, resilient IIP, and strong GDP growth provide comfort while persistent foreign outflows and uncertainty around US trade actions pose near term risks. The government has been proactive in its approach towards boosting consumption via reduction in income tax in Union Budget earlier and GST rate cut now. The expected monetary easing by the US Fed, GST rationalization measures, uptick in earnings growth and continued support from domestic institutions could provide fillip to market over medium term. We remain constructive on domestic focussed sectors such as Consumer Discretionary, consumer Staples and automobiles on expected pick up in consumption.

Happy Investing!