Market Insights

Summary: S. Naren (ED & CIO, ICICI Prudential AMC) (11-Mar-2026) flags a transition to moderate equity returns amid uninspiring valuations and weakening flows. With FIIs and retail exiting, markets turn trigger-driven. Opportunities emerge in energy, SIPs at better valuations, and unconstrained strategies, while gold remains a preferred stabilizer Key Takeaways Fundyantra Insights In a low-conviction market, flexibility and disciplined allocation may matter more than directional bets. Mutual fund investments are subject to market risks. Read all scheme-related documents carefully.

Summary: As highlighted by Anurag Mittal, Head of Fixed Income UTI Mutual Fund (10 March 2026), RBI’s prolonged pause and ample liquidity support fixed income stability. Opportunities lie in 2–5 year bonds and selective credit, while investors should align duration strategies with time horizons amid a steady rate environment. Key Takeaways Fundyantra Insights In a range-bound rate cycle, disciplined carry and credit selection may outperform aggressive duration calls. Mutual fund investments are subject to market risks. Read all scheme-related documents carefully.

Summary: This summary is based on the UTI Mutual Fund “Equity Market Insight – February 2026” webinar featuring Vetri Subramanyam (MD & CEO, UTI AMC) and Karthik Lakshmanan (Fund Manager, UTI Large Cap Fund). The discussion covered global macroeconomic shifts, trade developments affecting India, fiscal policy outlook, and implications for equity markets. Global and Macroeconomic Drivers Global Debt Shift Toward Governments A major macro trend over the last two decades is the sharp rise in government debt. Prior to the 2008 Global Financial Crisis, debt expansion was largely driven by households and corporations. However, since the crisis, governments have taken on significantly more debt to support economic growth and stabilize economies. This has resulted in higher interest payment burdens for governments, especially in developed economies. With both debt levels and interest rates rising, interest payments as a percentage of GDP have increased sharply across countries. This reduces fiscal flexibility, leaving governments with less room for growth-oriented spending. Emerging Markets vs US Performance Emerging markets have outperformed the US in the past year while the US dollar has weakened. Although historically a weaker dollar tends to support emerging market performance, the relationship is correlational rather than causal. Market performance ultimately depends on multiple factors, with corporate earnings growth and valuations being the most important drivers. Currency movements alone cannot explain sustained equity market performance. Global Trade Dynamics and India’s Position Shift from Multilateral to Bilateral Trade The global trade environment has shifted away from the multilateral framework (WTO-driven system) that dominated since the 1990s. Countries are increasingly relying on bilateral trade agreements. India has actively pursued several such agreements in recent years with partners including: The India–EU trade agreement is particularly significant because the EU is India’s largest trading partner. Currently, India’s share of EU imports remains relatively small compared to China. The agreement could help Indian exporters gain market share, though European exporters will also gain greater access to the Indian market. India–US Trade Relations The earlier trade tensions with the US around reciprocal tariffs and Russian crude purchases have largely been resolved. The current agreement effectively restores tariff conditions similar to those that existed in April 2025. India does not gain a major tariff advantage relative to peers, but it also avoids a competitive disadvantage. Given the US’s economic and geopolitical importance, simply moving away from a trade stalemate is considered a positive outcome for India India’s Fiscal Policy and Growth Outlook Fiscal Consolidation with Continued Capex The recent Union Budget reflects a balanced approach: The period of aggressive fiscal tightening appears largely behind us, and the current fiscal stance remains supportive of economic growth. Maintaining infrastructure investment while improving fiscal discipline provides long-term growth support without significantly weakening public finances. Implications for Equity Markets Key Structural Factors to Watch Several structural factors will influence equity markets going forward: Investment Perspective For investors, the key takeaway emphasized in the session is that short-term news flow should not drive investment decisions. Markets will continue to face daily volatility due to geopolitical and macro developments. However, long-term outcomes are primarily determined by corporate earnings growth and valuations, not by short-term macro headlines. Maintaining a disciplined investment approach aligned with financial goals remains the most important strategy for equity investors. Mutual fund investments are subject to market risks. Read all scheme-related documents carefully.

Summary: Global economic activity remains in expansionary territory, with improving PMI trends and strong services sector momentum across major economies. Commodity markets have rallied sharply due to strong demand and geopolitical tensions, while food inflation continues to moderate. In India, the RBI maintained policy rates at 5.25% with a neutral stance, while slightly revising inflation projections upward due to base effects. Growth expectations have improved modestly, supported by new trade agreements and improving global demand. Overall, the macro environment suggests stable growth, manageable inflation, and supportive global demand, though liquidity conditions and bond yields remain areas to watch. Global Growth Trends Global economic activity remains resilient. Manufacturing and services PMIs improved in January after a temporary slowdown in November and December, indicating a renewed expansion in global activity. Key highlights: Economic surprise indices in the US and Eurozone also indicate that economic data continues to outperform expectations. Commodity Markets Commodities saw a broad-based rally, with January recording one of the strongest increases in the past 25 years. Drivers included: Precious metals such as gold and silver surged as tensions emerged between the US and European nations regarding Greenland and concerns over potential reductions in US dollar reserves. Industrial metals like copper and aluminium remain in short supply due to rising demand from AI, technology infrastructure, and electrification trends. Energy Markets Energy prices also moved higher due to geopolitical and weather-related factors. Key drivers included: These factors pushed up both oil and natural gas prices, contributing to the broader commodity rally. Food Inflation While commodity prices rose, global food prices continued to decline. The UN Food Price Index fell for the fifth consecutive month, with declines in: These declines offset price increases in cereals and vegetable oils. For India, this trend is positive since food inflation plays a significant role in overall CPI dynamics. Global Bond Markets Bond yields moved higher across most developed markets. The rise was driven primarily by Japan’s long-term bond yields, which increased after the new Japanese government proposed tax cuts on food items, raising concerns about fiscal stability. Because the Japanese yen is widely used in global carry trades, movements in Japanese bond yields influenced bond markets globally, pushing up yields in the US and the UK. Emerging markets showed mixed trends: India Monetary Policy The RBI Monetary Policy Committee (MPC) kept policy rates unchanged at 5.25%, maintaining a neutral policy stance. Voting details: One member suggested shifting toward an accommodative stance. The RBI’s approach indicates a preference to monitor inflation dynamics before considering further policy moves. Inflation Outlook The RBI marginally revised its inflation forecasts upward. Revisions include: The increase is largely attributed to base effects, as inflation was unusually low in the previous year. Despite the revision, inflation remains close to the RBI’s 4% target, suggesting the central bank remains comfortable with the current trajectory. CPI Basket Revision A new CPI series will be introduced based on the 2024 Household Consumer Expenditure Survey. Expected changes include: Because of these changes, the RBI will provide full-year inflation projections in April after assessing the new CPI structure. Growth Outlook India’s growth outlook has improved modestly. Key developments supporting growth include: These agreements create a larger integrated trade network for India and are expected to support economic activity. The RBI revised its FY27 growth projections slightly upward, reflecting improved trade prospects and global demand. Liquidity and Money Markets Markets were expecting the RBI to introduce liquidity measures or CRR cuts, but no such steps were announced. Liquidity conditions remain tight: Despite policy rates falling significantly in the past year, short-term market rates remain relatively elevated. Risks Key risks to monitor include: Opportunities Several macro factors remain supportive: These factors could support sustained economic growth and stable financial markets. Closing View For India, the macro environment appears stable with moderate inflation, steady growth prospects, and expanding trade relationships. While liquidity conditions remain tight in the short term, the broader outlook suggests a balanced macro environment with manageable inflation and improving growth drivers. Mutual fund investments are subject to market risks. Read all scheme-related documents carefully.

Summary: Entering 2026, equity markets are navigating a complex transition phase marked by elevated long-term interest rates, fiscal dominance in developed markets, and uneven earnings delivery across segments. While headline indices remain near all-time highs, underlying market breadth tells a different story, with meaningful corrections in small-cap stocks and selective pressure even within mid-caps. This divergence reinforces the importance of valuation discipline, asset allocation, and realistic return expectations. India’s macro fundamentals remain comparatively strong, supported by fiscal discipline, structural reforms, and a stable policy framework. However, equity returns are likely to be driven more by earnings delivery and valuation discipline rather than broad-based multiple expansion. In this environment, large caps appear relatively better placed, while value investing—executed with a strong quality and cash-flow lens—offers a more resilient way to navigate volatility. Global and Macroeconomic Drivers Despite aggressive policy rate cuts by major central banks, long-term bond yields have remained elevated. In the US, fiscal expansion and heavy government borrowing have pushed term premiums higher, while inflation remains above target. Japan presents an even starker shift, with bond yields at multi-decade highs, raising concerns around the unwinding of yen carry trades and potential stress in leveraged global positions. The key takeaway is that fiscal policy, not monetary easing, is now the dominant force shaping long-term rates. While US corporate balance sheets remain healthy after years of deleveraging, government finances are increasingly stretched, with interest costs now rivaling defense spending. This backdrop creates a structurally higher cost of capital and limits the scope for sustained valuation expansion in global equities Gold and Household Leverage: Indian households are estimated to hold approximately 35,000 tons of gold, valued at nearly 90% of India’s GDP. Due to recent price appreciation, gold purchased over the last decade is now valued at double the original cost. This asset appreciation is notable, as household debt in India has been climbing consistently (reaching 42% of GDP in December 2024), driven particularly by non-housing retail loans. Gold holdings offer Indian households optionality to delever should they choose to do so AI, Productivity and Growth AI-led capital expenditure has emerged as a major driver of global growth, particularly in the US and parts of Asia. While the short-term impact on employment remains debated, historical data suggests that higher productivity ultimately supports real wage growth at the aggregate level. However, the distribution of benefits may be uneven across sectors and skill sets. From a market perspective, the key uncertainty is not productivity gains but whether AI investments will generate commensurate shareholder returns, a question that remains unresolved. India: Fiscal Discipline and Structural Strength Unlike several developed economies, India has followed a disciplined fiscal path post-pandemic. Fiscal deficits have been steadily reduced from peak levels, and the government has articulated a clear roadmap to bring debt-to-GDP closer to 50% by FY31. Recent income tax and GST cuts have already supported consumption, limiting further room for aggressive stimulus. Going forward, growth support is likely to come more from supply-side reforms—such as labor codes, higher FDI limits, and regulatory simplification—rather than large incremental fiscal spending. These measures may not produce immediate growth spikes but improve India’s long-term growth potential and capital formation. Market Breadth, Earnings, and Valuations While benchmark indices appear resilient, market internals reveal a stealth correction: This divergence reflects earlier valuation excesses, now translating into weaker forward returns. Earnings growth expectations also appear demanding, with FY27 projections near 17% despite nominal GDP growth closer to 10%, making delivery challenging. Valuation indicators suggest: This reinforces the case for moderation in return expectations and a bias toward quality and balance-sheet strength. Asset Allocation and Style Preferences Given the current setup: Value investing, when executed through intrinsic valuation, cash-flow focus, governance discipline, and avoidance of leverage, offers a way to participate without chasing momentum or narratives. Value Investing: Philosophy in Practice The value approach discussed emphasizes: Portfolio construction relies on sector valuation discipline, selective stock picking across market caps, and controlled active risk. Importantly, exits are driven by fundamentals and valuation extremes rather than short-term price movements. Closing View Equity markets in 2026 are unlikely to offer easy, broad-based returns. With valuations only partially corrected and earnings expectations still elevated, the environment favors discipline over aggression. A combination of realistic return expectations, large-cap bias, selective value exposure, and balanced asset allocation appears best suited for navigating this phase Mutual fund investments are subject to market risks. Read all scheme-related documents carefully.

Global Landscape: Resilience Amidst Chaos The year 2025 was described as a “year of chaos,” characterized by volatile tariff announcements and a roller coaster ride for equity and growth bond markets. Despite early fears that trade uncertainty would knock growth down, global growth remained resilient due to high fiscal spending by governments worldwide. While manufacturing activity moderated in the US and Eurozone, it was offset by strong activity in China, Korea, and Taiwan, largely driven by massive investments in Artificial Intelligence (AI) and semiconductor sectorsThe US Federal Reserve cut rates to the 3.50%–3.75% range as expected but signaled that future cuts would be limited, with dot plots indicating only one rate cut ahead in 2026. Consequently, bond yields have risen across major economies (excluding Indonesia), driven by strong growth expectations and fiscal deficits rather than aggressive monetary easing Domestic Developments Agriculture and Credit Trends On the domestic front, the agricultural outlook is positive with Rabi sowing progressing well; wheat acreage is at 107% and oilseeds at 111% of normal levels, supported by healthy reservoir buffers. While central government receipts have declined due to tax cuts and slower nominal GDP growth, the government is expected to meet its fiscal deficit targets through expenditure rationalization and scheme reorientation A critical trend for the banking sector is that credit growth (11.8%) continues to outpace deposit growth (9.4%). To bridge this gap, banks are aggressively issuing Certificates of Deposit (CDs), which has pushed one-year CD rates to approximately 6.9% Outlook: The End of the Rate Cut Cycle UTI Mutual Fund suggests that the best of the monetary easing cycle is behind us, and the RBI is likely to keep rates “lower for longer” to support growth rather than cutting aggressively. The Indian Rupee (INR) is expected to remain range-bound between 89.50 and 91.00 in the near term, as it is viewed as attractively valued relative to other currencies. A notable shift is occurring at the long end of the yield curve, which has underperformed due to reduced demand from pension funds and insurance companies as they shift asset allocations toward equities Investment Strategy for 2026 1. Hybrid Funds: Attractive due to positive carry available in the fixed income component and the benefit of automatic rebalancing.2. Financials: The sector is well-positioned to benefit from the resumption of credit growth and the inherent leverage that allows earnings to grow faster than credit growth, helping lift nominal growth.3. Large Caps: Preferred for lumpsum allocations due to more comfortable valuations Focus on UTI Small Cap Fund For investors navigating this environment, UTI recommends the following strategies based on investment horizons: • 1 Year+ Horizon: Investors should focus on the short end of the yield curve (1 to 3 years) through short-term or corporate bond funds, as this segment offers attractive opportunities due to the steepness of the curve. • 2 Years+ Horizon: Investors are advised to consider income plus arbitrage funds, which may offer better tax-efficient returns. • Tactical View: Investors should remain cautious on long-duration funds given the supply-demand dynamics and the conclusion of the rate cut cycle

Summary: This summary draws from the “Market Insight Equity – December 2025” webinar, featuring Vetri Subramanya (MD and CEO Designate) and Nathan Jain (Fund Manager, UTI Small Cap Fund and UTI Innovation Fund), covering global dynamics, market valuations, and the strategy of the UTI Small Cap Fund. Global and Macroeconomic Drivers China’s Export Powerhouse and Pricing Pressure: China reported exports exceeding $1 trillion in the first 11 months of 2025, a figure higher than the GDP of most countries. Export growth remains strong, particularly accelerating towards the EU and ASEAN countries, despite tariff discussions with the US. This dominance stems partially from extensive state incentives (subsidies, tax concessions, below-market cost borrowings), which have led to massive industrial overcapacity—for instance, China’s solar module capacity is 150% of global demand. This overcapacity causes weak pricing trends globally. Interestingly, China’s economically active population has been shrinking for nearly a decade, yet export production continues to rise, often shifting to automation and high-tech sectors, resulting in constrained wage growth Currencies and Competitiveness: The US Dollar has been depreciating, while the Indian Rupee (INR) touched an all-time low of 90 per USD. While a strong exporter, the Chinese Yuan has weakened against most global currencies, further feeding its export advantage. However, the Yuan has appreciated against the INR, which improves India’s competitive position relative to China Gold and Household Leverage: Indian households are estimated to hold approximately 35,000 tons of gold, valued at nearly 90% of India’s GDP. Due to recent price appreciation, gold purchased over the last decade is now valued at double the original cost. This asset appreciation is notable, as household debt in India has been climbing consistently (reaching 42% of GDP in December 2024), driven particularly by non-housing retail loans. Gold holdings offer Indian households optionality to delever should they choose to do so Market Valuations and Allocation Strategy Inflation and Interest Rates: Inflation in India is contained, with core inflation running around 4%. This comfort has allowed the Monetary Policy Committee (MPC) to cut rates and the RBI to provide liquidity infusions Valuation Disparity: Aggregate market capitalisation is currently 68% Large Cap, 22% Mid Cap, and 10% Small Cap. Small and Midcaps have increased their weightage, partly due to new listings and partly due to trading at richer valuations relative to Large Caps. Over the last year, the Nifty50 has returned +6%, while the Nifty Small Cap Index returned -12% Equity Allocation Index Comfort: Based on P/B, Dividend Yield, P/E, and P/E to Bond Yield, the Nifty50 is currently in the fair value zone, positioned at the lower end. However, Midcaps are in the absolute expensive territory, and Small Caps are in the expensive zone relative to their own history Key Risks and Opportunities: The primary risks identified are the low nominal GDP growth (sub 10%) making the consensus corporate earnings growth estimate of 16-17% for FY27 look like a “very high bar,” and the elevated valuations in the small and midcap segments Opportunities are seen in: 1. Hybrid Funds: Attractive due to positive carry available in the fixed income component and the benefit of automatic rebalancing.2. Financials: The sector is well-positioned to benefit from the resumption of credit growth and the inherent leverage that allows earnings to grow faster than credit growth, helping lift nominal growth.3. Large Caps: Preferred for lumpsum allocations due to more comfortable valuations Focus on UTI Small Cap Fund The Small Cap Value Proposition and Risk: The Small Cap universe provides exposure to segments unavailable in Large Cap or Mid Cap indices and has historically produced the largest number of multibagger stocks. However, this segment carries high risks; analysis shows that over a recent 10-year period, 162 out of 750 small cap companies saw value destruction exceeding 50%. Small caps also receive less analyst coverage and institutional ownership, requiring greater due diligence. Investment Strategy and Positioning: The UTI Small Cap Fund employs a rigorous filtering process, specifically avoiding companies with: value-destroying business models, balance sheet risks (high debt), and poor corporate governance records. The fund focuses on quality and growth, identifying four categories of investment: Category Leaders (e.g., MCX), Challengers (growing faster than large competitors), Specialty Pure Plays (operating in high-growth subsegments), and Opportunistic Stocks (value, cyclicals, or strategic change plays). The fund remains true to label, with 83% exposure to small cap and 17% to midcap stocks. Its quality and growth focus is reflected in a higher Return on Equity and a higher P/E ratio (45x) compared to the benchmark (41x)