Whalesbook
1. THE SEAMLESS LINK
The finalization of an ambitious Free Trade Agreement between India and the European Union, hailed as "the mother of all deals," injected a dose of optimism into Indian equities, providing a much-needed counterbalance to a generally risk-off global environment influenced by tariff policies. This significant development occurred against a backdrop of mixed corporate earnings and sustained foreign investor outflows, factors that collectively contributed to a cautious undertone in the domestic market. Despite these headwinds, strategic buying, particularly in the financial and metal sectors, managed to lift the benchmark indices.
2. THE SEAMLESS LINK
Axis Bank Powers Banking Sector Surge
Axis Bank emerged as a significant mover, its shares climbing more than 4%. The bank reported a 4% year-on-year growth in its December quarter net profit, reaching ₹7,010.65 crore. This performance was underpinned by stable asset quality metrics, including a Gross NPA ratio of 1.46% and a Net NPA ratio of 0.35% as of December 2025. Despite a slight compression in its Net Interest Margin (NIM) to 3.93% in Q3 FY25, the bank's advances grew by 9% year-on-year, with focus segments like Small Business Banking and Mid-Corporate showing robust expansion. The banking sector, in general, showed resilience, with private sector banks posting steady performance although facing NIM pressures and rising provisioning costs. Kotak Mahindra Bank, another key player, reported a 4.28% rise in standalone net profit to ₹3,446 crore for the quarter, though its shares saw a decline amid compressed NIMs.
FTA Fuels Sentiment, But Headwinds Remain
The India-EU FTA marks a historic milestone, potentially opening new avenues for trade and investment. Prime Minister Narendra Modi's announcement emphasized its significance [cite: News1]. This optimism, however, was tempered by ongoing foreign portfolio investor (FPI) selling, with outflows totaling Rs 4,113.38 crore on Friday, juxtaposed against domestic institutional investor (DII) buying of Rs 4,102.56 crore [cite: News1]. The broader market sentiment was also impacted by subdued corporate earnings growth, a trend observed across India Inc. during the Q3 FY25 reporting period, compounded by global economic uncertainties and supply chain disruptions.
Sectoral Performance and Laggards
Beyond banking, metal stocks also contributed to the gains, with Tata Steel being among the prominent advancers. The metal sector experienced a mixed performance in Q3 FY25. In contrast, some blue-chip stocks like Mahindra & Mahindra, Asian Paints, and ITC registered declines. Asian Paints, for instance, saw its shares fall nearly 6% after reporting a 4.8% drop in consolidated net profit for the December quarter to approximately ₹1,074 crore, despite a nearly 4% rise in revenue. The company's performance was impacted by exceptional items and subdued demand conditions.
3. THE FUTURE OUTLOOK
Analysts anticipate that while the India-EU FTA provides a positive catalyst, market direction will continue to be influenced by upcoming corporate earnings, FPI flows, and global economic indicators. The banking sector is expected to navigate margin pressures and credit cost concerns, with a focus on deposit mobilization and loan book quality. Tata Steel's strategic investments in green steel projects signal a forward-looking approach within the metal sector. Despite the day's gains, the cautious market undertone suggests that investors remain watchful of broader economic headwinds.