Indian equities rally on lower oil prices and easing global financial conditions after US midterms

Indian equities have surged after the recent US midterm elections, with the Nifty index gaining about 5.6% over five sessions and reaching a near three-month high on November 4. Foreign portfolio investors bought roughly Rs 7,284 crore of shares on the same day, marking four consecutive sessions of net inflows.

Analysts attribute the rally to three main factors: a decline in crude-oil prices, easing global financial conditions and a tentative recovery in corporate earnings. Brent crude fell below $94 a barrel after hitting October highs, easing the cost pressures on India’s large oil import bill, which had risen about 24% year-to-date.

"A sustained decline in crude would ease imported inflation, improve the current-account balance, reduce pressure on the rupee and lower input costs for a wide swathe of companies," said Emkay Research.

The softer oil market, combined with a weaker US dollar and a dip in the 10-year US Treasury yield to 4.89%, could give the Reserve Bank of India more flexibility to focus on domestic growth rather than defending the currency against imported inflation.

"The combination of softer crude and a weaker dollar could ease the pressure on the RBI to maintain a defensive monetary and currency stance," the commentary noted.

While the Democratic control of Congress may limit the US administration’s ability to pursue aggressive trade or geopolitical actions, analysts caution that it does not guarantee immediate policy reversals. The US president retains executive authority over trade measures, and fiscal deficits remain a concern.

The article also challenges the view that a rotation out of AI-related stocks will automatically boost Indian markets. US technology indices showed mixed moves after the election, with the Nasdaq rising while the semiconductor index fell, suggesting a sector-specific adjustment rather than a broad shift of capital.

Corporate earnings appear to be improving. Motilal Oswal raised its FY27 and FY28 earnings forecasts after companies in its coverage reported a 33% year-on-year profit increase in the July-September quarter. Excluding oil marketers, profit growth was around 30%.

"The improvement in earnings, coupled with a moderation in crude prices and easing external pressures, could provide the foundation for a more sustainable market recovery," the analysis concluded.

Nevertheless, analysts warn that risks persist, including the possibility of US fiscal challenges and future trade disputes. The overall assessment is that the balance of risks has shifted in India’s favor, but sustained market gains will depend on continued earnings strength and stable macroeconomic conditions.