For the past few years, equities have been the default expression of Indian optimism. Investors have treated every dip as an opportunity, every correction as a brief half in a longer climb. January, however, carried a slightly different tone.
It wasn’t a retreat; certainly not a panic. Just a subtle shift in posture. Gold, the old store of comfort in Indian households, edged past equities in monthly mutual fund inflows. The gap was small but suggests a change in mood.
Net inflows into gold exchange-traded funds more than doubled month-on-month to about Rs 24,040 crore during January but inflows into equity mutual funds slipped 14.35% to roughly Rs 24,029 crore, according to data from the Association of Mutual Funds of India (AMFI).
The difference was hardly dramatic. Yet in markets, inflection often begins at the margin. Investors did not rush for the exits. They did not dismantle their equity allocations. They simply chose to allocate more to gold than usual.
The backdrop was instructive. Indian benchmark stock market indices such as Sensex and Nifty 50 dropped 3.5% in January, with mid-cap and small-cap indices correcting more sharply. Valuations in certain pockets had been stretched.
In contrast, gold ETFs jumped between 18% and 26% during the month, per ValueResearch data. In dollar terms, gold prices rose about 13% during the month, extending a multi-month rally and touching record levels. Globally, too, gold ETFs recorded unusually strong inflows, reflecting a wider tilt toward perceived safe havens.
What explains this surge? Geopolitical tensions have lingered for many months. Trade negotiations remain unsettled. As global stock markets oscillated between relief and anxiety, gold benefited from both momentum and memory.
To be sure, this doesn’t signal a structural break in India’s growth story. But it was enough to cool stock market exuberance.
What is notable is what did not change. Systematic investment plan contributions, now the structural backbone of retail equity participation, remained steady at around Rs 31,000 crore. Net equity inflows stayed positive, extending a long-running streak.
Within equities, the composition of flows offered further clues. Large-cap funds attracted greater interest, while mid-cap and small-cap categories saw moderation. Hybrid and multi-asset strategies also drew healthy inflows. Investors appeared willing to temper exposure to more volatile segments while maintaining core equity commitments. Gold ETFs, in this context, functioned less as a replacement and more as a counterweight.
January’s data suggests a growing awareness of valuation dispersion and global risk. After an extended period in which equities dominated incremental savings, some rebalancing was inevitable. When one asset class runs ahead for long enough, discipline tends to reassert itself, especially if another asset is delivering strong momentum at the same time.
Markets are still trying to assess the trajectory of global trade negotiations and the durability of geopolitical tensions. What is visible, however, is a measured recalibration. Systematic equity exposure continues. Incremental allocations are shifting toward diversifiers. Portfolios are being tweaked rather than overhauled.
For long-term investors, episodes like this are reminders of how markets evolve. Prices move first. Allocations follow gradually. Core habits, once established, tend to endure. January did not mark a retreat from risk. It marked a market becoming more deliberate about balance.
Clarity Awaited
If recent inflows into gold funds reflected caution, the India-US trade framework shared over the weekend reflects something more subtle: uncertainty that has narrowed but not disappeared.
The announcement lowered tariff levels and removed an immediate penalty threat. Markets responded positively. But the framework, as released, leaves several material questions unresolved.
Energy sits at the centre of that ambiguity. The White House stated that India committed to halt direct or indirect imports of Russian oil, alongside the removal of a 25% penalty tariff and the introduction of a monitoring mechanism.
The joint statement, however, contains no explicit pledge of that kind. India’s foreign secretary has said energy sourcing will be guided by national interest, diversification, and price stability, with decisions ultimately made by oil companies. The commerce minister has similarly indicated that the trade deal does not determine commercial buying choices.
The balance of concessions also requires time to assess. India will reduce tariffs on selected US industrial and agricultural goods, while the US will lower reciprocal tariffs on roughly 55% of Indian exports to 18%.
India argues this rate compares favourably with those faced by other countries and supports labour-intensive sectors. Critics see asymmetry. The truth will depend less on negotiated percentages and more on sector-level transmission.
Agriculture adds another layer of sensitivity. Farm groups in India warn of price pressures in certain commodities. The government maintains that dairy, genetically modified products, meat, and poultry remain protected, with safeguards intact. As in past agreements, much may hinge on quotas, standards, and enforcement.
Then there is the $500 billion purchase intention from India, spanning energy, aircraft, technology, and coal over five years. Analysts have questioned the arithmetic and noted that execution depends heavily on private-sector decisions.
Negotiations continue. What has changed is the tone of engagement and the removal of immediate escalation risk. What has not changed is the number of moving parts still shaping outcomes.
Drawing a Firmer Line
If the trade deal left room for interpretation, the Reserve Bank of India this week chose clarity by proposing sweeping draft rules to curb mis-selling by banks – tightening how financial products are marketed, bundled, and sold. The direction is explicit: consent must be clear, recorded, and separate for every product. It cannot be clubbed or implied.
The draft formally defines mis-selling – covering unsuitable products, misleading information, compulsory bundling, and sales without explicit consent. Where mis-selling is established, banks must refund the full amount paid and compensate customers for losses.
The RBI has also moved against “dark patterns” in banking apps and websites – design features such as pre-ticked boxes, hidden charges, false urgency, and difficult cancellations. Banks will need periodic audits of user interfaces and must avoid nudging customers into unintended choices.
Third-party products, long a significant source of fee income, face sharper scrutiny. Banks cannot bundle them with their own offerings or present them as proprietary products. Sales calls are restricted to defined hours, and direct selling agents must be trained, certified and clearly distinguishable from bank staff.
That’s not all. Incentive structures that encourage aggressive selling have been discouraged. Boards will need to approve comprehensive policies covering suitability assessments, customer feedback, and compensation mechanisms.
The backdrop is familiar. The RBI had flagged concerns about the suitability of third-party products sold at bank counters and has pointed to persistent mis-selling, particularly in insurance distribution, over the past year.
So, what will change now? Well, the ability to distribute financial products may not change, but the economics and incentives around doing so could. Fee income linked to bundled sales, opaque digital journeys or volume-driven incentives face closer scrutiny. Compliance costs for banks could rise, too.
To be clear, the draft does not ban cross-selling. But it does redraw the boundaries.
Changing the Lens
Talking about redrawing and revisions, the government this week unveiled consumer price index (CPI) data that changes the lens through which the inflation numbers are read.
January’s consumer price inflation came in at 2.75% under a revised series – the first release with a 2024 base year and updated consumption weights.
The new series reduces the weight of food – historically the most volatile component – to 36.8% from 42.6%, adds categories such as rural rentals, online spending and streaming services, and updates nationwide price collection.
With food carrying a smaller share, headline volatility may ease over time. At the same time, the unusually favourable base effects that kept inflation soft toward the end of 2025 are beginning to fade.
Food prices firmed in January while core inflation appeared more moderate. The combination leaves inflation neither unusually benign nor uncomfortably high. It is back within the Reserve Bank of India’s 2-6% tolerance band for the first time since August 2025, but without signalling a decisive shift in trend.
The broader implication is continuity. Expectations of imminent rate cuts have already receded, and the Monetary Policy Committee had left rates unchanged last week, signalling a likely pause. A more current consumption basket may reduce the forecasting distortions seen in recent years, when inflation was repeatedly overestimated.
For markets, the adjustment is subtle. Inflation is no longer artificially soft. Growth projections remain resilient. And recent trade developments have steadied sentiment. While the data series has changed, the policy stance, for now, has not. What investors are watching is whether fading base effects and food volatility reintroduce pressure or whether this period marks a return to more predictable price dynamics.
Market Wrap
Indian stock market benchmarks logged losses this week, mainly due to a fall in IT stocks because of growing anxiety around AI automation. Fading hopes of rate cuts, both in India and the US, added to the worries.
The Nifty 50 slipped 0.9% and the BSE Sensex fell 1.1%, eroding gains from the interim India-US trade deal.
The Nifty IT index slumped 8.2% this week, its worst showing in 10 months. This takes its drop to 13.7% so far in 2026, surpassing the 12.6% decline in the entire last year. The index’s 10 constituents have lost total market value of about $50 billion in February.
Infosys tanked more than 9% while Tata Consultancy Services and HCL Technologies sank more than 8% each. Wipro dropped over 7% and Tech Mahindra lost 5.3% for the week.
Among other stocks, Coal India declined 5.5% while Adani Enterprises fell more than 4%. FMCG stocks Hindustan Unilever and ITC were also among the top losers, as were index heavyweights HDFC Bank and Reliance Industries.
Hindalco fell 3.6% after posting a 45% drop in Q3 profit and reporting $1.6 billion in expenses due to fire-related disruptions at US unit Novelis.
Almost half the Nifty 50 stocks ended in the green. State Bank of India and Royal Enfield bike maker Eicher soared 12.4% each this week on exceeding quarterly profit estimates.
Shriram Finance, Apollo Hospitals, Bajaj Finance, Trent and Tata Steel were the other top gainers.
Earnings Snapshot
- Hindustan Unilever Q3 profit from continuing operations drops 15% to Rs 2,590 crore
- SBI standalone net profit jumps to Rs 21,028 crore from Rs 16,891 crore; beats forecasts
- LG Electronics India Q3 profit plunges 62% to Rs 89.67 crore
- Lenskart consolidated net profit surges to Rs 131 crore from Rs 1.85 crore year ago
- Ashok Leyland profit rises 4.5% to Rs 796 crore, misses analysts’ estimate
- Britannia reports 17% rise in profit to Rs 680 crore, beats forecasts
- Titan profit jumps 61% to Rs 1,684 crore on higher gold jewellery prices
- Royal Enfield owner Eicher profit climbs to Rs 1,421 crore from Rs 1,171 crore year ago
- Hindustan Aeronautics posts 30% jump in profit to Rs 1,867 crore
Other Headlines
- NSE appoints Rothschild as independent advisor for IPO
- Hindalco expects up to $1.6 billion impact from last year’s fire at Novelis’s New York plant
- Zydus Life to pay $120 million to settle patent dispute with Astellas over bladder drug
- Lupin to settle patent dispute with Astellas over bladder drug for $90 million
- Adani Power forms atomic energy-focussed subsidiary
- RBI allows ICICI AMC to raise stake in HDFC Bank to 9.95%
- UBS plans to hire 3,000 in India; cuts jobs in Switzerland
- India’s net direct tax collections rise 9.4% on year in April-February to Rs 19.4 trillion
- Akasa Air co-founder Praveen Iyer leaving airline
- Fractal Analytics’s Rs 2,834-crore IPO subscribed 2.66 times
- Aye Finance’s Rs 1,010-crore IPO covered only 97% at end of bidding
That’s all for this week. Until next week, happy investing!
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