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Issue 33 | Nov 2026 Your Monthly Guide on Global and Local markets from our Research Head’s Desk.

Global Markets Reset. India Finds Its Footing.

Easing global pressures, resilient corporate earnings and renewed FPI interest are bringing India's market outlook back into focus.

Dear Clients and Stakeholders,

October 2026 marked a reality check for global financial markets as investors reassessed the sustainability of AI-driven growth, the outlook for interest rates, and the impact of persistent geopolitical tensions. While November 2026 marks the beginning of re-setting of geo-politics triggered by fall of US President’s party in mid-term elections. Immediate shift in narratives on middle-east crisis towards resolution led to sharp correction in crude oil prices easing energy led inflationary concern to large extent. Further, volatility was back in capex driven AI stocks across the globe as pace of investments may undergo a re-check. Aforesaid, developments are uncorking goldilocks scenario for India, smell of which lies in massive FPI’s buying into Indian equities over last 6/7 trading sessions. Economic activity remained broadly resilient across major economies, cool-off in bond yields, commodity and energy prices are soothing concerns around perceived stickiness of inflation which had weighed on market sentiment.

Global equity markets experienced heightened volatility over last month and a half. Following a prolonged period of outperformance, technology stocks came under pressure as investors shifted focus from ambitious AI-related spending plans to the return on investments and pace of future profitability. Softer capital expenditure guidance from several technology companies triggered a broad correction across AI-linked sectors, while investors rotated towards more defensive segments of the market. At the same time, global bond markets witnessed a sharp repricing, with long-term government bond yields correcting sharply from multi-decade highs amidst easing inflationary pressure.

As we move into forward, market attention is likely to remain focused on the balance between resilient economic growth, inflation trajectory in conjunction with monetary policy. While strong labour markets, healthy business activity, and continued investment in transformative technologies remain supportive for the global economy, elevated bond yields, geopolitical uncertainty, and tighter fiscal conditions are expected to keep market volatility elevated.

United States

Resilient Growth Amid Rising Inflationary Pressures

The US economy remained resilient through October, supported by healthy consumer spending, robust business activity, and improving industrial momentum despite elevated borrowing costs and geopolitical uncertainties. U.S. midterm elections remained a key focus during the month, culminating in a broad Democratic victory that resulted in the party securing control of both the House of Representatives and the Senate. Investors assessed the implications of the outcome for fiscal policy, regulation, government spending priorities, taxation, and the broader economic outlook, particularly against a backdrop of elevated inflation and higher interest rates.

Retail sales increased 0.8% MoM in September, marking a second consecutive month of robust growth, while industrial production rose 0.7%, its strongest increase in five months, supported by gains across manufacturing, utilities, and mining. However, the housing market remained under pressure, with both building permits and new home sales declining amid elevated mortgage rates and affordability challenges.

Inflation and monetary policy remained key areas of focus during the month. Headline inflation accelerated to 3.7% in September from 3.4% in August, driven largely by rising energy prices, while producer prices surged 1.3% MoM, recording their sharpest increase since March 2022. The Fed's preferred inflation measure, core PCE, edged up to 3.1%, reinforcing concerns that higher energy costs are increasingly feeding into broader price pressures. Against this backdrop, the Federal Reserve kept the federal funds rate unchanged at 3.75%-4.00%, while reiterating that inflation remains elevated and that future policy decisions will remain data dependent.

Business activity remained robust during the month, with the Services PMI rising to 58.8, its strongest reading since July 2021, supported by resilient domestic demand and strong order growth. Labour market conditions remained healthy, as initial jobless claims declined to 194,000, their lowest level since July, while unemployment remained broadly stable at ~4.1%. On the external front, the trade deficit widened to US$105.6 billion, driven by higher imports of crude oil, semiconductors, and industrial machinery, despite continued growth in exports.

Overall, the US economy is growing at an annualized pace of over ~2% in CY26 so far, supported by resilient consumer demand, strong business activity, healthy labour market conditions, and continued investment in technology and AI-related infrastructure. However, weakness in the housing sector, a more cautious outlook for AI-related earnings, moderating commodity and crude oil prices suggest that the Federal Reserve is likely to calibrate data driven monetary policy stance as it balances price stability while sustaining economic growth.

Euro Area and UK

Inflation Pressures Intensify as Growth Momentum Softens

In the Euro Area, policymakers adopted a cautious stance as inflationary pressures intensified while economic activity showed signs of moderation. The European Central Bank (ECB) kept its key policy rates unchanged in October, maintaining the main refinancing rate at 2.65% and the deposit rate at 2.50%, while warning that elevated energy prices could fuel inflation and weigh on growth. Inflation accelerated to 3.8% in September from 3.2% in August, reaching its highest level in two years, driven primarily by higher energy, services, and food prices. Producer prices also increased sharply by 1.9% MoM in August, reflecting the impact of rising energy costs on the broader economy.

Economic activity remained mixed, with retail sales edging up 0.1% in August, suggesting modest resilience in consumer spending despite elevated borrowing costs. However, industrial production fell 0.5%, marking a third consecutive monthly decline and highlighting continued weakness across intermediate goods, energy, and consumer goods production. On the external front, the Euro Area recorded a €16.1 billion trade deficit in August, as higher energy imports more than offset growth in manufactured exports.

Business activity remained resilient, with the Services PMI rising to 53.0, its strongest reading since November 2025, supported by improving domestic demand and a pickup in new business activity. Meanwhile, the unemployment rate edged up to 6.5%, the highest level since February 2024, indicating some softening in labour market conditions. In the United Kingdom, policymakers continued to navigate a backdrop of rising inflation and mixed domestic demand prompting them to hike benchmark interest rate by 25 bps to 4%. Inflation accelerated to 3.5% in September from 3.1% in August, reaching its highest level in nearly a year, largely due to higher transportation, housing, and energy-related costs. Consumer demand weakened during the month, with retail sales declining 0.4% MoM in September as higher prices and tighter household budgets weighed on spending.

In contrast, industrial production rose 0.8% in August, its strongest increase since November 2025, supported by stronger manufacturing output. On the external front, the UK's trade deficit narrowed sharply to £0.92 billion, the smallest since January, as imports fell faster than exports. Business activity remained in expansion territory, with the Services PMI at 52.1, supported by resilient demand for technology-related services despite broader economic headwinds. Labour market conditions improved, with the unemployment rate declining to 4.7%, supported by rising employment and labour force participation.

Overall, Europe continued to demonstrate resilience through expansionary business activity and stable labour markets.

Asia

Improving Growth Momentum Amid Diverging Domestic Demand Trends

In China, policymakers maintained a cautious stance as economic activity showed signs of improvement. The People's Bank of China kept its key lending rates unchanged for a seventeenth consecutive month, citing stronger economic data and reduced urgency for additional policy support. Economic growth accelerated to 4.5% YoY in Q3CY26 from 4.3% in Q2, supported by resilient exports and stronger activity in high-tech manufacturing sectors. Inflation edged up to 0.9% in September from 0.8% in August, while producer price inflation accelerated sharply to 5.0%, reflecting rising energy and input costs. Domestic demand also improved, with retail sales growth accelerating to 1.1%, its strongest pace in six months, while industrial production expanded 5.5%, supported by manufacturing and utility output.

Labour market conditions strengthened modestly, with the urban unemployment rate easing to 5.2%. On the external front, China's trade surplus widened substantially to US$133.5 billion, driven by strong exports of high-tech products amid the ongoing global AI infrastructure boom. Business activity remained resilient, supported by stronger growth momentum across manufacturing and services sectors.

In Japan, policymakers paused their policy normalisation efforts following September’s rate hike. The Bank of Japan kept its policy rate unchanged at 1.25%, maintaining borrowing costs at their highest level since 1995. Inflation accelerated to 2.1% in September from 1.9% in August, while Tokyo core inflation remained above the central bank’s target at 2.6%, although it eased marginally from the previous month. Consumer demand remained relatively resilient, with retail sales rising 2.3% YoY in September, extending gains for a seventh consecutive month. However, industrial production contracted 2.4%, marking its steepest decline since January amid weakness across key manufacturing industries and softer export demand. Producer price inflation moderated to 6.8%, indicating some easing in upstream cost pressures. On the external front, Japan’s trade deficit widened to JPY 536.6 billion as imports, particularly crude oil imports, continued to outpace export growth. Business activity remained in expansion territory, with the Services PMI at 51.3, although growth moderated amid softer demand, weaker export orders, and disruptions related to the Kumamoto earthquake. Meanwhile, labour market conditions improved, with the unemployment rate declining to 2.4% and employment rising to a four-month high.

Overall, Asia exhibited improving growth momentum during the month, supported by stronger economic activity in China and continued resilience in Japan. However, persistent inflationary pressures, supply disruption and uneven domestic demand conditions remain key challenges for the region's growth outlook.

India

Strong Domestic Demand Amid Rising Inflation and Policy Tightening

India's economy remained resilient during October, supported by strong domestic demand and robust infrastructure activity despite mounting inflationary pressures and higher energy costs. The Reserve Bank of India (RBI) raised the repo rate by 25 bps to 5.50%, its first-rate hike since February 2023, citing elevated inflation, global uncertainties, and currency pressures. At the same time, the RBI revised its FY27 GDP growth forecast upward to 7.1%, reflecting confidence in the economy's underlying strength.

Inflationary pressures intensified during the month. Headline CPI inflation accelerated to 5.54% in September from 4.83% in August, reaching its highest level since October 2024 and approaching the RBI's upper tolerance band. Food inflation remained elevated, driven by higher vegetable prices, while rising oil prices and a weaker rupee contributed to stronger transportation costs. Wholesale inflation also accelerated sharply to 11.39%, reflecting higher fuel, manufacturing, and food prices.

Economic activity remained robust despite some moderation in industrial output. Industrial production growth eased to 6.7% YoY in September from 7.8% in August, reflecting slower manufacturing growth and weakness in mining activity. However, infrastructure output surged 7.9%, its strongest growth since November 2023, supported by higher production of coal, iron ore, steel, and refined petroleum products. Business activity remained healthy, with the Services PMI at 55.2, indicating continued expansion in output and new orders, supported by strong demand in the financial and insurance sectors.

Labour market conditions remained stable, with the unemployment rate holding at 5.0% in September, reflecting continued resilience in employment conditions. On the external front, India's trade deficit stood at US$30.2 billion, while exports grew a strong 22% YoY, reaching a record high for the month of September despite a challenging global environment.

Quarterly, earnings update by India Inc. for 2QFY26, has been remarkably strong. Which has kept cherry pickers and bargain hunters busy of late. On an aggregate level about +450 companies (Ex-Nifty’50) from our basket has delivered PAT growth of ~35% YoY and for H1 it is around ~20%. Comforting has been cool-off on macro concerns like crude oil prices which have cooled-off significantly, appreciation in INR, mellowing geo-political tension in Middle East and aggressive buying FPI’s over last week.

Earnings update has largely been a beat on expectations. Banks in particular have reported strong lending and deposit growth, impeccable asset quality and far better core net interest income growth aided by strong retail loan book growth. Automobiles, Metals, Industrial Products, Consumer Durables, Telecommunications, Realty, Power and Capital Goods have reported strong volume and premiumization led PAT growth while operating margins suffered due to higher input costs. Large IT companies came up with stable earnings while guiding for moderate growth outlook.

Overall, India's growth momentum is on track supported by resilient domestic demand, strong infrastructure activity, and an expanding services sector.

Conclusion

The global economy continued to demonstrate resilience during October despite a more challenging macroeconomic backdrop characterized by commodity inflation, elevated energy prices, and heightened geopolitical uncertainty. Major central banks continued with cautious and restrictive monetary policy stance. Financial markets also faced increased scrutiny of AI-related investments, rising bond yields, and persistent geopolitical risks, leading to greater volatility and a more selective investor approach.

Looking ahead, the present Geo-political scenario, cool-off in crude oil prices, re-assessment of AI-related investment themes as regard to their valuations and earnings growth trajectory places India back in reckoning reinforced by strong earnings. It is presently trading at a PER of ~17.50x, 1 Yr Fwd (FY’28e) which is lower than mean of ~19x/20x, making it a compelling case for cherry picking.

At Chola Securities, we remain steadfast in our commitment to helping you navigate these complexities with clarity and foresight. As always, we aim to align your investments with evolving opportunities while ensuring resilience against emerging headwinds.

We sincerely thank you, our valued clients and investors for your continued confidence and partnership. Together, we look forward to embracing the challenges and opportunities ahead, ensuring sustained growth and success.

Regards,

Dharmesh Kant
Head of Research, Chola Securities