Indian equity markets are likely to remain firm through the week with a positive undertone, aided by a modest recovery in the INR/USD and steady global developments. That said, trading activity could be muted as the Christmas and New Year holidays dampen participation across global markets, keeping volumes thin. Key macro indicators to track include US Initial Jobless Claims, Manufacturing PMI data from the US and China, and India’s monthly automobile sales.
In the absence of near-term domestic catalysts, investor focus is expected to gradually shift towards the upcoming Q3 earnings season, which should play a decisive role in shaping market direction as we move into 2026. During the previous week, benchmark indices closed marginally higher, with the Nifty rising 0.3%, the Smallcap100 advancing 1.8%, while the Midcap index ended largely unchanged.
Sectoral trends were mixed—Defence (+5.5%), Metals (+2.7%), and FMCG (+0.8%) led the gains. Defence and Railways remained in focus amid expectations of increased public capital expenditure in the forthcoming Union Budget, reinforced by reports of the Defence Acquisition Council preparing orders worth nearly ₹80,000 crore. Metals extended their strong 2025 performance, delivering over 20% year-to-date gains, supported by expectations of Fed rate cuts, a softer dollar, improving demand signals from China, controlled supply dynamics, and healthier balance sheets.
Global macro developments also underpinned sentiment, with US GDP expanding at a robust 4.3% in Q3—the fastest pace in two years—while jobless claims remained below expectations, indicating continued resilience in the US economy. Domestically, the RBI announced liquidity-supportive measures, including ₹2 lakh crore in government bond purchases and a USD 10 billion swap, aimed at easing liquidity conditions, supporting credit growth, and stabilising financial markets. Importantly, 2025 marked a significant phase for Indian banking regulation, with over 80 reforms introduced to simplify norms, facilitate M&A financing, and strengthen the framework for sustained credit-led growth.
On the demand side, urban consumption continued to outperform, recording an 8.8% YoY increase in October, driven by easing food inflation, improved credit transmission, and stable wage growth. In contrast, rural demand contracted by 1.3% due to weaker farm prices and unfavourable terms of trade. Additionally, India and New Zealand have concluded negotiations for a comprehensive free trade agreement, expected to be signed in early 2026, with the objective of doubling bilateral trade from the current USD 2.4 billion over the next five years.
As 2025 draws to a close, the overall market environment remains supportive, underpinned by improving liquidity conditions, a stabilising earnings outlook, and a policy framework conducive to investment and credit expansion. Looking ahead to 2026, market returns are likely to be driven primarily by earnings growth, with a bias towards large-cap stocks and a selective, quality-oriented approach to mid-caps. Overall, market sentiment remains steady to positive, with Q3 earnings and global macro developments expected to guide the next leg of market movement.
Sector in Focus
Defence, FMCG, & Metal remained in focus during the week.
Stocks that Remained in Focus During the Week
Krishna Institute of Medical Sciences has entered into a Leave and License Agreement to take approximately 1.168 acres of land in Chennai, Tamil Nadu, on a long-term lease for setting up a super speciality hospital. The proposed capacity expansion is around 300 beds, and the investment in the project is expected to be around Rs 300 crore.
Varun Beverages, announced to completely acquire South Africa-based firm Twizza, through its its own local subsidiary there - The Beverages Company Proprietary Limited (Bevco). Twizza is engaged in the business of manufacturing and distribution of own-branded non-alcoholic beverages. It operates through three manufacturing facilities at Cape Town, Queenstown, and Middelburg and has a combined annual production capacity of 100 mn cases. The acquisition is done on "Enterprise Value of Rs 1,118.7 cr payable in cash.
KEC International: After hearing the petition, the High Court has kept the Power Grid Corporation of India (PGCIL) order in abeyance and has further allowed KEC to continue participating in ongoing bids, including those of PGCIL, until the aforesaid action is completed by PGCIL.
Zydus Lifesciences entered into partnership with Bioeq for licensing supply and commercialization of Bioeq’s Vascular Endothelial Growth Factor (VEGF) inhibitor.
Vikran Engineering:The company has received a work order worth Rs 2,035.26 crore from Onix Renewables, a special purpose vehicle (SPV), for the development of 600 MW AC solar power projects across multiple locations in Maharashtra.
Ajanta Pharma: The specialty pharmaceutical formulations company has entered into an in-licensing agreement with Biocon for Semaglutide, a GLP-1 receptor agonist.
BEL: The company has received an order valued at Rs 633 crore from Cochin Shipyard for the supply of items required for various sensors, weapon equipment, fire control systems, and communication equipment.
HCL Tech: DIB, the world’s first Islamic bank and the largest in the UAE, has announced a strategic partnership with HCLTech to accelerate the adoption of Artificial Intelligence (AI) across its ecosystem.
Ultratech: The company announced the commissioning of additional cement capacity at its Maharashtra and Rajasthan units, leading to an increase in production capacity of 1.8 mtpa. As a result, its total domestic grey cement manufacturing capacity stands at 188.66 mtpa. Along with its overseas capacity of 5.4 mtpa, the company’s global capacity stands at 194.06 mtpa.
KNR Construction: The company has executed Share Purchase Agreements (SPAs) with Indus Infra Trust for the sale of its 100% shareholding (including sub-debt) in four SPVs — KNR Palani Infra, KNR Ramagiri Infra, KNR Guruvayur Infra, and KNR Ramanattukara Infra. The company is expected to invest Rs 566.83 crore (in the form of equity and sub-debt) in the SPVs, against which it is expected to receive Rs 1,543.19 crore.
