Overview of Market
Overview
Indian equities stumbled amidst a challenging global environment with Nifty 50 shedding 1.2% and Sensex losing 1.5%, even as the broader market indices gained 2%+, during the month. August also marked an important change in market structure with the implementation of the Closing Auction Session, or CAS, for eligible stocks. India’s economy remained resilient, with real GDP expanding 7.8% in Q1 FY2026-27. Although the RBI’s August policy sounded relatively dovish initially, the subsequent MPC minutes conveyed a hawkish undertone, contributing to firmer domestic bond yields. Policymakers indicated broadening price pressures, with headline inflation projected to peak at 5.9% in Q3, strengthening a case for a rate hike later this year. While July’s rainfall supported sowing and crop establishment, August’s deficit coincided with the critical crop-development and grain-filling period, increasing yield risks for rice, maize, pulses and oilseeds, which could lead to higher food inflation. Meanwhile, the RBI announced an earlier closure for the FCNR(B) window (from Sep to Aug) as it managed to garner USD inflows exceeding $125b (v/s expectations of ~$75b) At the Jackson Hole symposium, a hawkish tone from the Fed Governor raised rate-hike expectations. This contrasted with intervention from the US Treasury to buy back long-dated bonds in face of rising yields. US-Iran tensions kept Hormuz traffic depressed, favouring quality assets, gold and liquidity. Major central banks (US Fed ECB, BoE) kept benchmark policy rates unchanged but remained hawkish. During the period, US market outperformed other major markets. Nasdaq Composite (+3.9%), Kospi (+3.4%), Nikkei (+3.0%) were all positive while Hang Seng (-1.2%) was negative.
Fixed-Income, Currency and Commodity Markets
Bond yields tightened across the globe. Japan’s 10-year yields reached a three-decade high and long-dated US yields approached pre-global-financial-crisis levels. US public debt crossed US$40 trillion, heightening fiscal concerns. The U.S. Dollar Index (DXY) remained range bound, as hawkish Federal Reserve and elevated US yields supported dollar, while fiscal concerns and changing rate expectations capped gains. The rupee appreciated modestly to ₹95.17 per US dollar from ₹95.39 in July, supported by FCNR(B) inflows, RBI intervention and index-related flows. However, elevated crude oil, importer dollar demand, foreign-flow volatility and the RBI’s forwarddollar obligations limited gains. Commodity markets diverged in August. Agricultural prices firmed as deficient rainfall threatened rice, maize, pulses and oilseeds. Base metals remained supported by supply risks, though weak manufacturing capped gains. Gold strengthened on geopolitical and fiscal concerns, while Brent fluctuations mirrored the developments around the Straits of Hormuz.
Flows & sectoral performance
DIIs remained net buyers (~₹58,268 Cr), while FIIs continued to be net sellers (~₹7,532 Cr). Sectors outperforming benchmark: Metals (+3.7%) and PSU Bank (+2.9%) | Sectors underperforming benchmark: FMCG (-6.3%) and Media (- 3.8%). Fund Performance (5-year period ending Aug’26): - Equity & Growth Funds: Annualized returns of 7–13% - Balanced & Bond Funds: Annualized returns of 6–8% (Refer to annexures for detailed fund-wise performance)
Old Method
New Method