Synopsis

The Big Picture

India's cyclical recovery — interrupted earlier by the Middle East conflict — is set to resume following the US–Iran ceasefire and the sharp correction in crude prices that followed. The note strikes a constructive but deliberately cautious tone: the macro setup has improved, but global and domestic swing factors keep the outlook selective rather than broadly bullish.

Global Backdrop

Growth remains below trend, though the ceasefire and lower energy prices improve the picture at the margin, supported by resilient US growth and strong corporate earnings. Offsetting this, inflation control has re-emerged as the dominant global policy priority, the US Fed has turned more hawkish, and the dollar sits at a one-year high — while nervousness around the sustainability of the AI trade continues to build.

India's Macro Outlook

The improved external environment has fed through to India: FY27 GDP forecasts are being revised higher, worries over the current account and fiscal deficits have eased, and timely RBI measures (FCNR-B and ECB dispensations) have largely dispelled fears of a third straight year of balance-of-payments deficit. This supports a steadier rupee (expected around 93–95/USD) and has pushed anticipated rate hikes out toward late FY27/CY27. The monsoon — tracking well below normal — is now the key risk.

Markets, Earnings & Flows

Corporate earnings remain resilient, but with valuations still demanding, returns are expected to be increasingly earnings-led and stock-specific. Foreign equity flows remain elusive, local mutual fund flows are slowing, and a heavy IPO/OFS supply pipeline is likely to keep markets selective in the near term.

Portfolio Strategy

Spark Capital PWM retains a marginal overweight on equities, favouring active multicap and sector-rotation strategies, select mid- and small-cap and structural ideas (manufacturing, exports, energy transition), and EM equities as a rupee hedge. In fixed income, the focus is on high-quality short-to-medium-term accrual while avoiding the long end of the curve, complemented by income-oriented real assets (REITs/InvITs) and a continued strategic allocation to gold.