April was dominated by rising geopolitical tensions in West Asia, particularly US–Iran developments and continued risks around the Strait of Hormuz, which kept energy markets tight and risk sentiment volatile. Brent crude remained elevated as ceasefire hopes proved fragile. Despite this, Indian equities delivered a strong performance, with the Nifty rising 7.4% - its best monthly gain since Dec 23, supported by better than expected Q4 earnings that helped offset geopolitical concerns. Energy stocks outperformed, led by power, aided by the ongoing multi year capex cycle across generation, transmission and renewables. Realty also gained traction following Lodha’s strong Q4 results and its data centre foray. Broader markets outperformed headline indices on improving earnings visibility and valuations, with midcaps rising 12.6% in Apr, supported by defence stocks. IT underperformed sharply after weak earnings and guidance from Infosys and soft Q4 prints from HCL Tech, TCS and Wipro. Financials were mixed amid patchy Q4 results, tighter ECL norms and RBI intervention in FX markets. Globally, US equities rallied on strong mega-cap tech earnings and renewed AI optimism. DXY weakened overall on softer US growth data, though it remained volatile strengthening around the Fed’s hawkish hold and Middle East tensions before falling late month after Japan’s yen intervention and ahead of key US macro data.;

India’s Manufacturing PMI: rose to 54.7 in April 2026, up from 53.9 in March. While indicating expansion (above 50), the growth remains sluggish due to high input costs driven by ME conflict, marking a near four-year low in momentum. GST Collection: India's gross GST collection for April 2026 hit a record high of `2.43 trn, marking an 8.7% YoY growth compared to April 2025. This surge was driven by a 25.8% increase in import-related IGST and steady 4.3% growth in domestic transactions, with net revenue reaching `2.11 trn. Mar inflation: March's headline inflation reached a 14-month high of 3.4%YY. Food inflation increased reflected combination of base (vegetables) and momentum effect (edible oil, meat). Cooking gas price saw an increase, but the broader energy category and underlying core CPI (excluding precious metals at 2.1%YY) showed muted pressure, indicating limited impact from geopolitical conflicts.

The clouds of the West Asia conflict still hovers India’s economic outlook due to uncertainty arising from likely fuel shortages and rising energy costs if the present impasse were to prolong. Even as this becomes a key monitorable, India’s domestic macros were healthy before the crisis, and should provide buffer to absorb some of the price shocks.

On a separate note, corporate earnings, the most critical vector for the markets, have been encouraging and on an accelerating trend.

Data on March quarter reporting by corporates until now suggests a strong acceleration in revenue growth from low single digits to mid double digits over the past 4-5 quarters. Cost inflation, while a likely given, will take 3-6 months to feed into earnings. On expected lines, inflation is expected to mean revert in FY27 but will be welcome as it will lift nominal GDP, push up revenue growth and possibly help margins as well. All this reaffirms a cyclical recovery in earnings for India in FY27 that had come into question with the onset of the conflict. .

Our base case of a mean reversion in the performance of the Indian economy and of the market remains albeit with some delay. The plethora of policy measures and the fiscal space that India has should support growth in these conditions. The sharp underperformance of India in FY26 and CYTD, along with record FII outflows has established a favourable base for Indian equities and makes the risk-reward much more attractive than at the start of CY26. Moreover, the recent underperformance of our markets since the start of the conflict does make the risk-reward for equity investors much more attractive than at the start of CY26.

We reiterate that event risks are typically overstated by the market in the short run but also invariably end up presenting a lucrative investment opportunity when looked back from a 2–3-year horizon. In such market conditions we believe investors could consider a range of options such as flexi-cap strategies (for medium risk investors) to staggered investments in small cap funds (for high-risk investors) and well-structured multi-asset funds (for low-risk investors). Patience as a virtue cannot be emphasized enough under such circumstances.

The West Asian conflict that erupted in late February kept financial markets on edge. While a ceasefire between the parties paused active military engagement, the US blockade of the Strait of Hormuz severely constrained Iran’s economy. The Strait consequently remained near standstill, intensifying the global energy shock.

War-related developments continued to drive volatility across asset classes. Crude oil traded in a broad $90–$118 range during the month, after briefly spiking to $126 in early May. This sharp price variability spilled over into global rates, with the 10-year UST yield fluctuating between 4.25% and 4.43%.

Domestic markets mirrored this turbulence. The 10-year benchmark yield moved from around 6.87% in mid-April to 7.02% by month-end. Meanwhile, the rupee—despite opening the month on a stronger footing supported by RBI measures—reversed course and weakened to near the 95 mark by the end of the month.

Outlook

Persistent geopolitical tensions in West Asia and the resulting energy disruptions have materially elevated uncertainty and stagflation risks across global markets. This backdrop has complicated the monetary policy trade-off between growth and price stability, while also increasing the risk of fiscal slippage. Fixed income markets globally, including India, have remained volatile, responding to ongoing conflict developments and policy signals.

Although the US and Iran agreed to a 14-day ceasefire in early April—which was subsequently extended—the US blockade and Iran’s control of the Strait of Hormuz effectively disrupted energy flows, leading to continued supply shocks.

Against this backdrop, the FOMC, under Jerome Powell, delivered his final policy decision, keeping rates unchanged while retaining an easing bias in the statement. Notably, three members dissented on maintaining this bias. The overall tone was balanced with a hawkish tilt, as Powell acknowledged that some members had considered rate hikes given the prolonged Iran conflict. However, he reiterated that policy would remain data-dependent, with decisions contingent on the conflict’s trajectory and duration and its implications on the inflation and employment.

Domestically, MPC minutes reflected a broadly balanced stance. Encouragingly, some members indicated a willingness to support growth, provided inflation remains within the target range. On the monsoon outlook, despite El Niño concerns, members expressed comfort based on a strong summer harvest and adequate reservoir levels. Consequently, OIS markets, which had earlier priced in sharper rate hikes, have moderated these expectations.

On liquidity, banking system conditions tightened gradually in the latter half of the month. The government briefly resorted to WMA mid month, later reversing it after GST inflows. This tightening pushed up money market rates, with 1-year CD yields rising above 7.10%, pricing in potential rate hikes. However, these levels offer value, in our view, as liquidity conditions are likely to ease with the expected RBI dividend transfer.
Looking ahead, a resolution of the West Asia conflict could be supportive for bonds. A balanced monetary policy stance and relatively contained government supply make the 10-year segment attractive at yields above 6.90%. Corporate bonds also offer value, with spreads remaining elevated versus sovereigns.
From an investment perspective, a cautious and calibrated approach remains appropriate. Investors may prioritize shorter-duration strategies—such as Ultra Short Duration, Low Duration, and Money Market funds—which offer attractive carry with limited duration risk at current yields. For medium- to long-term horizons, Short Duration and Corporate Bond funds provide favorable risk-adjusted opportunities. Gilt funds with longer duration exposure may be considered tactically by higher-risk investors, particularly in anticipation of a gradual yield curve flattening.