By Sunil Subramaniam, Financial Sector Veteran & Ex-MD of Sundaram Mutual Fund, Chennai
Indian benchmark equities closed lower in August 2026, breaking a two-month winning streak as elevated crude oil prices, firm global bond yields, and persistent foreign institutional investor (FII) selling kept the market undertone subdued.
A. Market Cap-Curve Dynamics
Selling pressure widened down the market capitalization curve. Large-cap benchmarks displayed relative resilience, supported by select heavyweights and steady domestic institutional inflows. In contrast, mid-caps, small-caps, and micro-caps experienced sharp profit booking and liquidity thinning, reflecting a distinct risk-off stance from retail and high-net-worth market participants.
| Index | Performance |
|---|---|
| Nifty 50 | -1.20% |
| Nifty Midcap 100 | -1.35% |
| Nifty Smallcap 100 | -1.99% |
| Nifty Microcap 250 | -2.64% |
B.Institutional Activity and Derivatives Structure
B1. Cash Market
| Institutional Category | Net Flows (₹ Cr) |
|---|---|
| FII | -35,200 |
| DII | +33,500 |
B2. Derivatives
F&O Positioning: The Nifty monthly Put-Call Ratio (PCR) hovered between 0.82 and 0.94 throughout August, reflecting continuous call writing at key overhead strike levels (24,500–24,700).
FII Long-Short Ratio: FII index futures positioning remained net short, with the long-short ratio compressing from 38% early in the month to around 24% heading into the August expiry.
C. Key Sectoral Breakdowns
| Sector | Performance | Details |
|---|---|---|
| Nifty Metal | +2.8% | Supported by global supply adjustments and base metal stability |
| Nifty Auto | +1.4% | Festive channel inventory filling and resilient domestic demand |
| Nifty FMCG | -0.9% | Defensive holding pattern; rural demand concerns amid uneven monsoon |
| Nifty Energy | -2.4% | Crude price volatility and margin pressure on refining/marketing |
| Nifty Financial Services | -2.9% | Muted credit growth projections and sticky cost of funds |
| Nifty Realty | -3.6% | Higher financing hurdles and sequential slowdown in pre-sales |
| Nifty IT | -4.2% | Persistent headwinds from AI transition risks, lack of forward clarity, and tech capex delays |
D. Macroeconomic and Cross-Asset Benchmarks
Monetary Policy Setting: The Reserve Bank of India retained its neutral monetary policy stance during its August review, maintaining key policy rates unchanged while monitoring food inflation and global policy spillover risks.
Key Benchmarks; Jul to Aug; Directional Shift
| Key Benchmarks | Jul | Aug | Directional Shift |
|---|---|---|---|
| Brent Crude Oil ($/bbl) | 78.40 | 81.90 | Hardened |
| US Dollar Index (DXY) | 104.10 | 103.75 | Consolidating |
| US 10-Year Treasury Yield (%) | 4.18 | 4.26 | Hardened |
| India 10-Year G-Sec Yield (%) | 6.79 | 6.83 | Range-bound |
| USD/INR (Spot) | 95.22 | 94.96 | Range bound |
| 1-Year Forward Swap Premium (%) | 2.70 | 2.89% | Mild Increase |
About the author:
Sunil Subramaniam, Former Managing Director and CEO of Sundaram Mutual Fund, is among the most seasoned voices in India’s investment management industry, with a career spanning over four decades across banking, insurance, and asset management. Currently, he advises several investment firms and financial institutions on macroeconomic trends, market strategy and asset allocation among others. He also runs a YouTube channel, ‘Sense and Simplicity by Sunil’, where he breaks down complex market trends, macroeconomic developments, and investment strategies into accessible insights for retail investors.
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