Indian Markets Eye Higher Open as Global Optimism Meets Cautious IT Earnings
Overview
Indian equity markets are poised for a stronger opening, buoyed by positive global sentiment. As Q3 FY26 IT earnings season kicks off with TCS and HCLTech, analysts anticipate an earnings pickup after six quarters of consolidation, though derivatives data suggests underlying caution with a low Put-Call Ratio.
Stocks Mentioned
Indian equity markets are anticipated to start Monday's session with gains, tracking a wave of positive global sentiment. The Gift Nifty futures indicate an opening jump of approximately 180 points for the benchmark Nifty.
IT Earnings Take Center Stage
This week marks a crucial juncture as companies begin reporting their third-quarter results for the fiscal year ending December 2025. The focus will sharpen on corporate performance and future guidance. Tata Consultancy Services (TCS) and HCLTech are slated to announce their earnings on January 12.
Earnings Growth Expected
Emkay Global noted an expected pickup in earnings, projecting a potential break from six quarters of consolidation. The firm anticipates topline growth of 10.7% year-over-year for its covered companies in Q3 FY26, a notable acceleration from 5.6% in Q2 FY26. Discretionary spending, boosted by festive demand and favorable GST rates, is seen driving profit after tax (PAT) growth by 14.5%. However, this headline figure may mask underlying weakness, with Emkay observing that 42% of its coverage universe could report PAT growth below 10%.
Market Valuation and Volatility Concerns
The Nifty has experienced a correction of about 2.5% from its recent peak within the first ten days of January 2026. Current valuations are trading at approximately one standard deviation above the mean, prompting caution among some strategists. The path ahead may involve near-term volatility until a definitive India-United States trade agreement is finalized.
Derivatives Signal Caution
Options trading data presents a more subdued picture. Dhupesh Dhameja, Derivatives Research Analyst at SAMCO Securities, highlighted that the derivatives setup mirrors the cautious sentiment seen in the cash market. Aggressive positioning by call writers at at-the-money and nearby strikes appears to be capping immediate upside potential. The Put-Call Ratio (PCR) has fallen to 0.48, signaling an oversold condition and indicating a dominance of call writing. While this scenario could lead to some short-covering, the broader derivatives structure suggests a preference for bearish positions.
