Nifty 500 Profits Soar 16% in Q3, Marking 8-Quarter High

The latest reporting season reflects a broad-based recovery in profitability, which provides a more supportive foundation for equity markets going forward, according to Bajaj Finserv AMC report.

However, the data showed that domestic equity markets have remained largely range-bound for nearly 18 months despite a strong bull run in several global markets, although improving domestic fundamentals have started easing some of the earlier headwinds.

"Corporate earnings momentum has strengthened meaningfully over the past few quarters. The latest reporting season reflects a broad-based recovery in profitability, which provides a more supportive foundation for equity markets going forward," said Sorbh Gupta, Head-Equity at Bajaj Finserv Asset Management Limited.

Other domestic indicators have also improved. Credit growth has returned to double digits, reflecting stronger demand and improved liquidity, while consumption indicators have begun recovering following GST cuts, the report said.

It also highlighted that the Reserve Bank of India's cumulative 125 basis points of rate cuts, along with liquidity infusion measures, have helped lower borrowing costs for companies and consumers.

However, fresh uncertainties in 2026 have added to market volatility. The rapid expansion of artificial intelligence globally has raised concerns about potential short-term impacts on demand for Indian IT services and job creation, contributing to the sector's recent underperformance.

"Technological transitions such as artificial intelligence often create periods of uncertainty for traditional service models. However, Indian IT companies have historically demonstrated the ability to adapt to such shifts," Gupta said.

Geopolitical tensions in the Middle East have also increased risks related to crude oil prices. India imports about 85 per cent of its crude oil requirement, with nearly half of these shipments passing through the Strait of Hormuz, making supply routes vulnerable during regional conflicts.

A prolonged conflict could push up inflation, weaken the rupee and affect sectors such as aviation, paints, chemicals and oil marketing companies, while also triggering foreign portfolio investor outflows, according to Bajaj Finserv AMC.

Meanwhile, fixed income markets also saw volatility after the Union Budget and the Monetary Policy Committee meeting, with FPI outflows and geopolitical tensions pushing the rupee to a record low and bond yields higher.

Siddharth Chaudhary, Head-Fixed Income at Bajaj Finserv Asset Management Limited, said the revamped Consumer Price Index series with a 2024 base year confirms benign core inflation, strengthening the case for a stable policy environment.

However, escalating tensions between the US and Iran later pushed crude prices higher again, weakening the rupee and steepening the bond yield curve, particularly at the ultra-long end.

- IANS