At the previous close, Indian equity benchmarks ended firmly in the green, with the Sensex rising 426.86 points (0.51%) to 84,818.13, while the Nifty gained 140.55 points (0.55%) to settle at 25,898.55.
Despite the positive close, Indian equities are currently in a phase of consolidation, marked by occasional downward bias, according to Krishna Sanghavi, Chief Investment Officer – Equities at Mahindra Manulife Investment Management.
Market Structure: Who Drives Indian Equities?
Speaking to CNBC-TV18, Sanghavi explained that the Indian stock market operates through a delicate balance of three key participants:
- Domestic investors, who act as steady, long-term buyers
- Indian corporates, which remain continuous suppliers of equity
- Foreign Institutional Investors (FIIs), who function as the swing factor
“When FIIs turn buyers, you suddenly have two buyers and one seller, which supports the market. When FIIs sell, the equation flips to two sellers and one buyer,” Sanghavi noted. This dynamic, he stressed, largely determines market direction in the short to medium term.
2026 Outlook: Positive Bias, But FII Participation Is Crucial
Looking ahead to 2026, Sanghavi maintained a constructive outlook for headline indices, though he cautioned that a decisive upside move will require a meaningful return of foreign capital flows.
Indian equities, which had sharply outperformed other emerging markets in recent years, have now gone through a period of consolidation. This has helped narrow the valuation premium India once commanded.
“Earlier, the narrative was that India was expensive. After the last 12–18 months, that gap has reduced, and valuations have caught up,” he said, suggesting India may once again look attractive to global investors if external conditions stabilise.
IPO Boom and Market Valuations
On the supply side, Sanghavi flagged the surge in IPO activity as a key factor influencing market valuations. The rise in the market-cap-to-GDP ratio, often cited as a sign of expensive markets, has been driven largely by new equity issuance and fresh market-cap creation, rather than pure valuation re-rating.
This influx of supply, while healthy for capital formation, has added to near-term consolidation pressures in the secondary market.
Bottom Line
- No strong reason to turn bearish on Indian equities
- Markets likely to remain range-bound with a slight downward bias in the near term
- FII flows remain the biggest trigger for the next meaningful rally
- Valuation comfort is improving after a long consolidation phase
Keywords: Indian stock market outlook, Sensex Nifty today, FII flows India, equity market consolidation, IPO impact on markets, 2026 market outlook, Mahindra Manulife CIO views
