Indian equities - Broad Rally Tests Earnings Delivery
The Nifty 50 rose 1.58% to 23,810.85, supported by heavy foreign institutional investor buying. FIIs were net buyers of Rs 6,836.81 crore on November 3, bringing their three-day net purchases to nearly Rs 13,550 crore. Domestic institutional investors were net sellers of Rs 3,678.9 crore on the same day. The rally was broad-based, with the BSE Smallcap 250 index rising 1.04% and the BSE Midcap 150 index gaining 0.88%, both outperforming the large-cap BSE100 index.
The market's advance-decline ratio was robust, with 368 advances against 128 declines on the BSE500. Gains were led by stocks like Linde India and Marico in the mid-cap space and GMDC among small caps, while sectoral performance was mixed.
The key question for the longer term is whether earnings can validate the market's re-rating. Motilal Oswal has raised its Nifty EPS forecast to Rs 1,247 for FY27 and Rs 1,428 for FY28. Kotak Institutional Equities estimates EPS growth of 17.9% in FY27 and 13.4% in FY28. The divergence between strong FII inflows and DII selling suggests a rotation, and the sustainability of the rally hinges on these earnings upgrades materialising across market segments.
US equities - Relief Rally Questions Leadership
US equities staged a relief rally, with the Dow Jones Industrial Average rising 3.22% to a one-month high. The S&P 500 gained 1.83% and the NASDAQ Composite climbed 1.81%. Gains were led by the Consumer Services, Health Care, and Financials sectors. Major contributors included 3M Company, Microsoft, and Amazon.com, which rose between 6.91% and 9.67%.
The rally followed political clarity from the US midterm elections. JPMorgan's trading desk had forecast only modest moves for the most likely outcome, suggesting the relief was largely priced in. For the longer term, the focus shifts to whether leadership can broaden beyond the largest technology names. Goldman Sachs maintains a year-end S&P 500 target of 8,000, rising to 8,700 by end-2027, driven by earnings growth.
Gold - Rebound Faces Real Rate Test
Gold rose 2.9% to $4,056 an ounce even as the ICE Dollar Index firmed to 101.3. This broke the typical inverse correlation between the dollar and commodities. Brent crude oil held at $101.61, also defying the stronger dollar. The dollar had dipped to four-week lows near 101.25 earlier, pressured by the US midterm election results.
The longer-term path for gold depends on the trajectory of real interest rates and sustained physical demand. UBS forecasts gold rising toward $5,400 an ounce by September 2027, supported by central bank buying and geopolitical uncertainty. The World Bank projects gold prices rising about 37% in 2026 before declining 9% in 2027. The metal's recent resilience despite a firming dollar and real yield near 2.6% is being tested.
Debt - Yield Drop Meets Structural Focus
The benchmark 10-year Indian government bond yield dropped nearly 10 basis points to 7.3154% in its biggest single-day rally since April, driven by falling crude oil prices. The RBI's liquidity management showed improved bank participation, with a VRRR auction on November 4 receiving bids of Rs 73,907 crore against a notified amount of Rs 50,000 crore, a sharp reversal from weak participation the day before.
The dramatic yield improvement faces domestic inflation pressures and the central bank's focus on market structure. For the longer path, Nomura expects the RBI to raise the repo rate by 25 basis points to 5.75% in December, followed by a pause through 2027. The terminal rate is seen as a recalibration to neutral levels, with future actions contingent on currency and inflation dynamics.
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