Indian Equities Extend Winning Streak Amid Rising Inflation and Mixed Corporate Earnings

Indian equities extended their winning streak to a third consecutive week, supported by stronger corporate earnings and sustained foreign buying, even as rising inflation and domestic institutional selling raised questions about the rally's durability. The Nifty fell 0.6% on Friday to close at 25,144.30, while the Sensex declined 0.4% to 81,592.44. For the week, however, the indices gained 0.45% and 0.69%, respectively. Capital goods, financial services and realty stocks led sectoral gains, while IT, metal and utilities declined.

Market Activity And Earnings

A Mint analysis of standalone results for 2,892 BSE-listed companies showed revenue growth accelerating to 21.9% year-on-year in the September quarter, while profit rose 26.2%. This marked a sharp improvement from the previous quarter. Foreign portfolio investors bought ₹21,653 crore of equities during the week, while domestic institutional investors sold ₹21,938 crore. Nikunj Saraf, chief executive officer of Choice Wealth, noted that earnings growth is not uniform across sectors. Kranthi Bathini, director of research at WealthMills Securities, said companies delivered encouraging results despite geopolitical uncertainty. India's gains trailed several Asian markets like Taiwan and Japan, while Nvidia shares fell following executive changes.

Inflation Pressures And RBI Policy

The market rally faces a new test from rising inflation. Retail inflation climbed to 6.09% in October from 5.54% in September, breaching the Reserve Bank of India's 6% upper tolerance limit. Food inflation rose to 8.94%. This reading has put the RBI's upcoming monetary policy review in focus. Saraf warned that a rate increase remains possible if inflation stays elevated, which could trigger volatility in rate-sensitive sectors. Meanwhile, the rupee stood at 94.15 against the dollar, and crude oil was quoted at $94.63 a barrel.

Context

Stock market rallies in India are frequently influenced by the push and pull between foreign portfolio investments and domestic institutional activity. When retail inflation breaches central bank tolerance levels, policymakers often weigh interest rate adjustments to cool price pressures, which directly impacts borrowing costs and equity valuations in growth sectors.