The indices opened with a cautious bias, with the Sensex swinging from red to green in the opening session. The index started at 81,882, up 108 points or 0.13% higher, but soon ended 24 points lower at 81,749, before recovering 190 points to 81,964. The Nifty trended higher at 25,103 (57 points) amid a cautious note, with investors bracing for the Q2 FY26 earnings season, starting Thursday with Tata Consultancy Services (TCS).

While IT stocks have been under the weather post the U.S. Visa controversy, the markets will be looking for management commentary on the demand outlook. With the Nifty 50 still trading above its long-term valuation averages, analysts see limited near-term upside until corporate earnings show a meaningful recovery.

Domestic brokerages project Nifty earnings growth in the modest range of 6–8% for FY26, citing persistent headwinds from global volatility and subdued domestic demand. The Nifty’s 8% year-on-year PAT growth in the first quarter of FY26 marked the fifth straight quarter of single-digit growth, underscoring the lack of earnings momentum.

Analysts expect a pickup in the second half of FY26, supported by recent GST rate rationalisation, easing inflation, and the RBI’s 100-bps rate cut to 5.5% alongside liquidity infusions worth ₹9 lakh crore through forex swaps and open market operations. According to Yes Securities, the proportion of stocks facing earnings downgrades above 2%, which eased to 34% this quarter from 46% in Q4 FY25, signalling growing confidence in FY27 forecasts.

On the macro front, FII outflows of $9 billion between July and September reflect ongoing global risk aversion amid geopolitical conflicts and trade uncertainties. Although the World Bank has upgraded India’s FY26 GDP growth outlook to 6.5% from 6.3%, citing domestic resilience and tax reforms, it has trimmed the FY27 forecast to 6.3% due to concerns over U.S. tariffs.

The Street will be awaiting directional cues from early Q2 results and macro signals, with earnings recovery most likely expected in the second half of FY26, hinging on policy reforms, GST relief, and stability in global conditions.