India's Markets Rally on Falling Oil, Softer Dollar, but Earnings Hold the Key

Indian stock markets rallied following the Democratic Party's victory in US midterm elections, with the Nifty rising 5.6 percent over five sessions and foreign investors returning as buyers. The outcome is expected to ease geopolitical tensions and reduce pressure on crude oil prices. Brent crude fell below $94 a barrel, benefiting India's oil import bill, which had risen 24 percent year-to-date. Lower oil prices could ease inflation, improve the current account deficit, and give the Reserve Bank of India more flexibility on monetary policy, while softer US Treasury yields and a weaker dollar support emerging markets. A sustained rally depends on corporate earnings recovery, with Motilal Oswal raising FY27 and FY28 Nifty estimates after a 33 percent profit increase in the September quarter. However, risks remain, including US fiscal challenges and potential trade disputes, while the anticipated rotation out of AI stocks into India appears overstated.