Indian Markets Set for Flat Opening Amid Holiday Volumes as FPIs Turn Net Sellers
Indian equity markets are expected to open with a mildly positive bias, supported by steady global cues and strong domestic fundamentals. Gift Nifty indicates marginal gains. FPIs have turned net sellers after recent positive activity. Q2 earnings analysis shows improvement momentum, with mid-caps leading in earnings upgrades. Derivatives data reflects growing optimism, with a Put-Call Ratio of 1.08 and India VIX at 9.38. The 26,200 level is identified as a key pivot for sustained bullish momentum.
*this image is generated using AI for illustrative purposes only.
Indian equity markets are expected to begin trading with a mildly positive yet cautious bias, supported by steady global cues and resilient domestic fundamentals. Gift Nifty at 26,230 signals marginal gains for domestic markets, though holiday-thinned volumes are likely to keep volatility contained. Foreign portfolio investors (FPIs), after remaining positive in recent days, have turned net sellers again, with market participants closely monitoring their behavior.
Ponmudi R, CEO of Enrich Money, noted that most global markets are operating amid holiday-thinned liquidity ahead of Christmas, with participation likely to remain selective, favoring consolidation rather than aggressive directional moves. Risk sentiment remains stable, reflected in subdued volatility levels, indicating the market is in a pause phase rather than a distribution phase.
Corporate Earnings Show Improvement Momentum
Motilal Oswal Financial research analysis of Q2 results indicates that earnings of India Inc are likely to improve going forward. Their analysis of recent earnings revisions reveals a significant shift from the past trend of easing earnings cuts to actual earnings raises.
| Earnings Revision Period | FY26 PAT Estimate Change | Previous Readings |
|---|---|---|
| Three months ending 2QFY26 | +2.00% (first upgrade) | -6%/-3%/-4%/-2% |
| Post 2QFY26 season | FY27 estimates flat to +0.50% | Continuing improvement trend |
The earnings upgrade momentum shows clear segmental differences, with mid-caps posting maximum earnings upgrades at 3.10%, while large-caps also demonstrated strength at approximately 2.00%. Small-caps remained laggards with continuing downgrades of 5.50%.
Derivatives Signal Growing Optimism
The derivatives space reflects a growing optimistic bias among market participants. Dhupesh Dhameja, Derivatives Research Analyst at SAMCO Securities, highlighted that put writers have aggressively added fresh positions at at-the-money and nearby strikes, reinforcing a strong support base with every minor decline. Call writers have reduced exposure at lower strikes and rolled over positions to higher levels, signaling expectations of a continued buy-on-dips environment.
| Derivatives Indicator | Current Level | Trend |
|---|---|---|
| Put-Call Ratio (PCR) | 1.08 | Improved, indicating bullish sentiment |
| India VIX | 9.38 | Declined 3.07%, reflecting easing anxiety |
| Key Pivot Level | 26,200 | Critical for sustained bullish momentum |
Technical Outlook and Key Levels
Volatility has moderated further with India VIX declining by 3.07% to 9.38, reflecting easing market anxiety and continued comfort among participants. Derivatives data shows aggressive call writing at the 26,200 strike, while strong put open interest at the same level reinforces the importance of 26,200 as a key pivot zone.
Amruta Shinde, Technical & Derivative Analyst at Choice Broking, emphasized that a sustained close above 26,200 will be essential to extend bullish momentum. However, failure to decisively cross this level could result in continued consolidation in the near term, particularly given the holiday-thinned trading environment expected to persist.
Earnings upgrades have emerged for the first time since Q1 FY25, with mid-caps leading at 3.1% upgrade. This development comes as FPIs turn net sellers, potentially impacting market sentiment in the short term.
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