Indian Markets Eye Weak Opening Despite Strong 7.4% GDP Growth Forecast for FY26

Indian equity markets are bracing for a challenging opening on Thursday, with analysts expecting weakness despite encouraging economic growth projections. The Statistics Ministry's advance estimate of 7.4% real GDP growth for FY26 has failed to lift market sentiment, as global headwinds and domestic concerns continue to weigh on investor confidence.

Market Opening and Sentiment

The Gift Nifty trading at 26,190 indicates a gap-down opening of approximately 50 points for the Nifty. Market sentiment remains cautious as both the Nifty and Bank Nifty hold key support levels while encountering stiff overhead resistance.

Ponmudi R, CEO of Enrich Money, highlighted the challenging environment: "With both the Nifty and Bank Nifty holding key support levels but encountering stiff overhead resistance, market sentiment remains cautious amid elevated geopolitical tensions, renewed tariff-related concerns, and continued foreign portfolio outflows."

Economic Growth Projections

Despite market weakness, India's economic fundamentals show promise. The Statistics Ministry has projected strong growth metrics for the upcoming fiscal year:

Economic Indicator	FY26 Estimate	Previous Fiscal
Real GDP Growth	7.40%	6.50%
Nominal GDP Growth	8.00%	Higher than estimate

The growth acceleration is attributed to strong performances by the services sector and manufacturing. Rajani Sinha, Chief Economist at CareEdge Ratings, noted that the 7.4% GDP growth estimate aligns with expectations, supported by favorable factors including GST rationalization, lower income tax burden, low inflation, interest rate cuts, and strong rural demand.

Market Outlook and Earnings Focus

Trading activity is expected to remain selective, with market participants shifting focus to stock-specific opportunities rather than broad-based positioning. The December-quarter earnings season, beginning next week with results from index heavyweights, will be crucial for near-term market direction.

Emkay Global Financial projects a recovery scenario, expecting FY27 Nifty EPS to bounce back to 14% growth, accompanied by broad-based earnings recovery. Their key investment themes include autos, internet/new age businesses, and small and mid-cap lenders.

Derivatives and Global Context

The derivatives landscape reflects the prevailing sideways bias. Dhupesh Dhameja, Derivatives Research Analyst at SAMCO Securities, observed that call writers have added fresh positions at-the-money and nearby strikes, effectively capping near-term upside. The Put-Call Ratio has slipped to 0.73, indicating heightened caution and increased seller presence at higher levels.

Asia-Pacific markets present mixed signals, with Japan, China, and Hong Kong markets trading weak, while Korea's Kospi has surged. This mixed regional performance adds to the uncertainty surrounding domestic market direction.

Fiscal and Monetary Policy Implications

Despite nominal GDP growth estimated at 8% for FY26, economists believe the government will manage to meet the fiscal deficit target of 4.4% of GDP. Support comes from higher dividend transfers by the RBI and controlled revenue expenditure, while capital expenditure remains robust.

With healthy GDP growth projections, analysts expect the Monetary Policy Committee to pause on further rate cuts in the next meeting, preserving policy space for future action only if growth outlook deteriorates amid the turbulent global landscape.

The Indian equity markets extended their losing streak for the third consecutive session on Wednesday, with investor sentiment remaining cautious ahead of third-quarter earnings and key US employment data. The BSE Sensex declined 102.20 points or 0.12% to close at 84,961.14, while the Nifty 50 fell 37.95 points or 0.14% to settle at 26,140.75.

Market Performance and Key Drivers

Despite the decline, benchmark indices showed resilience by recovering from intraday lows, with the Sensex bouncing back from its low of 84,617 in the final hour. Market breadth remained marginally positive with 2,104 stocks advancing against 2,068 declining on the BSE.

Index	Closing Level	Change (Points)	Performance (%)
BSE Sensex	84,961.14	-102.20	-0.12%
Nifty 50	26,140.75	-37.95	-0.14%
Nifty Bank	59,990.85	-128	-0.21%
Nifty Midcap 100	61,424.70	+276	+0.45%
Nifty Smallcap 100	17,958.50	-	+0.39%

Analysts attribute the cautious sentiment to multiple factors including profit-booking in heavyweight stocks, rising geopolitical tensions, weak global cues, and anticipation of quarterly earnings results.

Analyst Views on Market Direction

Vinod Nair, Head of Research at Geojit Investments, highlighted that domestic market sentiment remains cautious with risk-off undertones ahead of third-quarter earnings and key US jobs data. While quarter-on-quarter corporate earnings are expected to improve, foreign institutional investors remain risk-averse amid global trade uncertainty.

"Profit-booking in autos and financials weighs indices, though selective buying in IT, pharma, and mid-caps did provide some cushion. Adding to global complexity, China's export curbs on rare earth heighten supply chain risks. In this macro backdrop, equities are likely to stay range-bound; a 'buy-on-dips' strategy focused on large-cap themes appears prudent," Nair said.

Technical Analysis and Trading Range

Rupak De, Senior Technical Analyst at LKP Securities, noted that the Nifty remained volatile during the session though found support at the 21-day exponential moving average. The index is expected to remain range-bound between 26,000 and 26,300 in the near term.

Technical Levels	Support	Resistance
Key Range	26,000	26,300
Immediate Support	26,100	26,373
Breakout Levels	Below 26,000	Above 26,300

"Any decisive fall below 26,000 may trigger further weakness. On the other hand, a decisive move above 26,300 would be required for a directional upmove in the Nifty," De explained.

Global Market Influences

US markets showed modest gains early Wednesday as investors monitored technology announcements and digested employment data. The ADP report showed private sector hiring increased by 41,000 jobs in December, slightly below consensus but indicating recovery from November's job losses. Investors are focusing on the government payrolls report due Friday for better insights into the jobs market.

European markets picked up bullish trades after eurozone inflation data showed price increases slowed to 2.00% year-on-year in December, aligning with the European Central Bank's target. However, the pan-European Stoxx 600 remained flat due to banking stocks declining on reduced rate hike prospects.

Most Active Stocks and Market Activity

In terms of turnover, HDFC Bank led with ₹5,025 crore, followed by ICICI Bank (₹2,249 crore), Hindustan Copper (₹1,975 crore), and RIL (₹1,688 crore). Volume-wise, Vodafone Idea dominated with 45.65 crore shares traded, while YES Bank and Ola Electric Mobility also saw significant activity.

Most Active by Value	Turnover (₹ crore)
HDFC Bank	5,025
ICICI Bank	2,249
Hindustan Copper	1,975
RIL	1,688
Indian Energy Exchange	1,684

Over 140 stocks hit their 52-week highs, including Nestle India and Titan, while 121 stocks slipped to their 52-week lows. Stocks showing buying interest included Tata Elxsi, Elecon Engineering, and Saregama India, while selling pressure was evident in Cipla, Mahindra & Mahindra Financial Services, and Sun TV.