Indian Equities Face Cautious Week Ahead Of Budget Announcement, Mixed Investor Flows On Net Basis

India’s equity markets are navigating a delicate phase as investors brace for the Union Budget presentation this weekend. While benchmark indices Sensex and Nifty demonstrated resilience recently, recovering from weak openings to close approximately 0.3 percent higher, the week ahead presents a complex backdrop of earnings surprises, macroeconomic expectations, and conflicting capital flows operating on a net basis.

The underlying economic narrative remains decidedly positive. The Economic Survey’s First Advance Estimates revealed that India’s real GDP growth is projected at 7.4 percent for FY26, with Gross Value Added growth reaching 7.3 percent, cementing the nation’s position as the fastest-growing major economy for the fourth consecutive year. Chief Economic Adviser V.A. Anantha Nageswaran encapsulated the sentiment succinctly: “India is an oasis of economic performance in the global scenario. The growth numbers stand out in comparison to any other part of the world.”

Foreign And Domestic Capital Show Divergent Strategies On Net Basis

The capital flows paint a nuanced picture of investor confidence and caution. Foreign investors reduced their equity positions, offloading shares valued at Rs 394 crore on a net basis, according to provisional exchange data. Conversely, domestic institutional investors demonstrated stronger conviction, accumulating shares worth Rs 2,634 crore on a net basis during the same period. This divergence signals a potential shift in international investment sentiment, even as local institutions maintain their bullish positioning.

Currency movements have added another layer of uncertainty. The Indian rupee slipped to historic lows near the 92 level before recovering marginally to finish the day down 18 paise at 91.96 against the U.S. dollar. The pressure stemmed from robust dollar demand linked to derivative contract maturities and corporate hedging activities, reflecting broader global financial dynamics.

Global Markets Grapple With Technology Headwinds And Geopolitical Risks

International equity benchmarks delivered a mixed performance, with trade anxieties and corporate guidance weighing on sentiment. U.S. equity futures declined as Apple cautioned investors about margin compression, intensifying concerns regarding the return on artificial intelligence investment spending. U.S. President Donald Trump’s recent actions—including de-certification threats against Canadian aircraft manufacturers and executive orders targeting trade tariffs on oil-producing nations—have injected additional uncertainty into market calculations.

On the positive side, U.S. Senators reached a compromise to avert a partial government shutdown scheduled for this weekend, temporarily easing fiscal concerns. Trump indicated he would announce his Federal Reserve chair nominee on Friday.

Commodity Markets Rally On Supply Concerns

Precious metals and energy markets have shown stronger conviction. Spot gold has surged nearly 24 percent so far this month, positioning itself for the best monthly performance since the 1980s, trading below $5,300 per ounce before recovering. Oil prices hovered near multi-month highs, buoyed by geopolitical tensions and concerns that potential U.S. military action against Iran could disrupt Middle Eastern crude supplies.

U.S. And European Equities Show Divergent Weakness

Overnight U.S. trading saw major indices conclude on a softer note following Microsoft’s disappointing cloud business growth report. The Dow Jones Industrial Average managed a marginal 0.1 percent gain after recovering from early session losses, while the S&P 500 declined 0.1 percent and the technology-focused Nasdaq Composite retreated 0.7 percent. European bourses also ended in mixed territory as investors processed earnings from major continental corporations. The pan-European Stoxx 600 dropped 0.2 percent, while Germany’s DAX index fell 2.1 percent following disappointing results from enterprise software giant SAP. France’s CAC 40 finished marginally positive, and the U.K.'s FTSE 100 gained 0.2 percent.

Indian investors are now positioned at a crossroads—awaiting the Union Budget for potential policy tailwinds while monitoring divergent capital flows on a net basis and assessing how global market headwinds might reverberate through their equity portfolios in the coming trading sessions.