Moneycontrol Pro Weekender | Running in place

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Dear Reader,

Stock markets appear to be doing just about enough to keep investor hopes alive. Friday saw the Sensex gain by half a percent, but declines in previous sessions meant that compared to Monday, it ended virtually flat. The broader basket of top 500 stocks fared no better.

Fund manager Ananya Roy and Moneycontrol Pro columnist asked ‘Breakout, breakdown, repeat: Why is the market not moving?’ this week. She attributes the malaise to the delayed bilateral trade deal with the US and also to India largely missing out on the AI investing boom. That boom is what has swept up US indices, leading to them outperforming India by a wide margin. While a time correction can grind investor patience, it’s not the first time it’s happening, she writes.

But there is hope for domestic investors on the AI investment opportunity front. The MC Pro research team put out a detailed report on how data centres can provide an able proxy to participate in the AI growth story. In its words, “Despite perceptions that India lags in AI, a powerful surrogate ecosystem is taking shape. While technology giants and large conglomerates dominate headlines, some of the most consistent AI-linked opportunities lie with the providers of critical infrastructure and enablers. They include companies across power, telecom, digital infrastructure, battery chemicals, and cooling solutions, such as refrigerant gases, which stand to benefit as the data centre ecosystem scales.”

The team published this in two parts, one made available for all to read on the investment logic behind the theme. The other was an actionable report with 17 stocks in it picked out from the various sectors identified, meant exclusively for MC Pro subscribers.

Another point mentioned in Roy’s article on markets was the weak rupee that breached the 91 mark against the dollar. This makes FIIs reluctant to invest as in dollar terms their returns have been more abysmal than that earned by domestic investors. Aparna Iyer took a close look at the rupee’s state at a time when a Goldilocks outlook for the economy is in play. Again, while the US trade deal is a key contributing factor, so are portfolio outflows in equities and dwindling foreign inflows into the bond market. While this may seem a tough spot to be in for the currency, the worst may be behind is what analysts believe, with strong economic growth and low inflation supporting the rupee.

While FPI flows tend to rise and ebb with a variety of short and long term factors, patient capital in the form of FDI is what could provide some stability. Friday brought news that Japan’s MUFG will be investing around Rs 40,000 crore to pick up a significant minority stake in Shriram Finance. While that is welcome addition to the FDI inflow pool, policymaking has taken some major steps this week.

The government passed a new insurance law that allows 100 percent FDI in the sector, taking it up from 74 percent. Writing on it, Aparna Iyer’s view was that it does open the door for interested, deep-pocketed foreign insurers to go it alone, rather than in alliance with Indian partners, the key constraint is distribution. Incumbents have locked down on the distribution footprint either through their own or the bancassurance network. While that makes it difficult for a foreign player to go solo, if someone wants to go down that path, it is now possible.

In addition, the government allowed the private sector to invest in nuclear power, another development that opens the door to FDI. It will also amend the nuclear civil liability for contractors, which was a key demand from US suppliers to participate in India’s nuclear capacity build-up plans. While there’s a long way to go, foreign companies are likely to be very interested in investing in this sector in a country with growing energy demand.

The reform drive has not gone unnoticed. Nomura Research took note of these two –insurance and nuclear power, the bilateral trade pact with Oman and the introduction of a Securities Markets Code to consolidate legacy capital market regulations into one law. Meanwhile, SEBI has made significant changes to stockbroker regulations and MF fees, making them contemporary, investor-friendly but also business-friendly, wrote Shishir Asthana. The authors of the Nomura note, Sonal Varma and Aurodeep Nandi, wrote, “Taken together, these four announcements signal a policy shift towards diversification, structural reforms, and attracting long-term capital. This continues from previous announcements, such as the GST rate rationalisation and labour market reforms.” They believe that more reforms will be set in motion and will support the Goldilocks outlook for the economy.

However, the real surprise was when the usually sceptical – and correctly so, as market movements have proved in FY26 – Sanjeev Prasad of Kotak Securities turned optimistic. A strategy report dated December 17, co-authored with Anindya Bhowmik and Sunita Baldawa, reflects optimism in 2026 with “a strong recovery in earnings” barring a few sectors, backed by improved domestic consumption demand and better macros. Key to macros is a conclusion of a US-India trade deal that proves to be mutually beneficial with lowered tariffs. Investors who believe in Santa Claus would have already kept it at number one on their wish-list of gifts for Christmas, or in the New Year at the least.

Cheers,

Ravi Ananthanarayanan

In case you missed them, here are some of the stories and insights we published this week, apart from our technical picks in the equity, commodity, and forex markets:

Hotel sector, Hitachi Energy, KSH International IPO, IDBI Bank, Muthoot Finance, Himadri Speciality, TCS, Discovery Series: KRN Heat Exchangers, Discovery Series: E2E Networks, Accenture’s results’ impact on IT sector outlook, Weekly Tactical Pick: A defence player.

Markets

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Financial Times The worried investor’s guide to 2026

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From colonising Mars to measuring with Mars Bars — addressing your wilder monetary queries

Two views of AI and Big Tech

Prediction markets and the casino mentality of 2025

Personal Finance: NPS becomes a must-have for your retirement portfolio

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Politics The Eastern Window | India has emerged as a hot political issue in Bangladesh elections

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