Gold, silver outshine equities in H1, rupee loses amid global woes

Yellow metal logs best half-yr returns in 30 yrs; weakest H1 for indices since FY23

Gold and silver delivered standout returns in the first half of FY26 (H1FY26), outshining domestic equities, as global uncertainty drove investors towards safe havens. While gold jumped 29.4 per cent — its best first-half return in three decades — silver soared 41.2 per cent, the strongest since its 53 per cent during the lockdown year (FY21).

 

Domestic equities, on the other hand, recorded modest gains in H1FY26, weighed down by persistent selling from overseas investors that also pressured the rupee.

 

The Sensex and Nifty advanced 4.6 per cent and 3.7 per cent, respectively — their weakest first-half performance since H1FY23, when both indices had slipped around 2 per cent.

 

 

The broader market fared better, with the Nifty Midcap 100 and Nifty Smallcap 100 rising about 9 per cent each. On Tuesday, benchmark indices closed lower for the eighth straight session due to relentless foreign fund outflows and caution ahead of the Reserve Bank of India’s interest rate decision.

 

The rupee also came under pressure in H1FY26, hitting fresh lows against the dollar. It has depreciated 3.7 per cent — after starting at a good note in April — so far this financial year, dragged down by a stronger greenback, rising crude oil prices, and foreign outflows. 

 

Foreign portfolio investors (FPIs) pulled out more than ₹37,000 crore from domestic stocks, with many redirecting funds to relatively cheaper markets such as China. In contrast, domestic institutional investors (DIIs) infused close to ₹4 trillion, supported by a steady shift of household savings into financial assets, mainly through mutual funds.

 

India’s overall market capitalisation stood at ₹451.6 trillion at the end of H1FY26 — down nearly ₹23 trillion from a year earlier. Sectorwise, automobiles, public-sector banks, and metals outperformed, while IT lagged, with the Nifty IT index losing 9 per cent. “The last six months were marked by tepid corporate earnings and uncertainty surrounding trade tariffs, which led to FPIs withdrawing money from India. The sales growth in the June quarter was in single digits in a host of sectors, including IT, auto, cement, and FMCG,” said Chokkalingam G, founder of Equinomics. 

 

“Tariff war heightened in the first half of this financial year. The frenzy for gold is primarily due to the uncertainty surrounding the tariff war,” Chokkalingam said. 

Analysts flagged weak earnings delivery, higher US tariffs, and increased H1B visa fees as key headwinds during the period. However, many expect performance to improve in the second half, as valuations turn more attractive and the benefits of GST cuts filter through.

 

“While earnings growth expectations may still ease, valuations are no longer stretched. Government policy is becoming supportive, and most foreign funds are underexposed. We believe Indian equities are attractive,” said Herald van der Linde, head of equity strategy at HSBC, which recently upgraded India from ‘neutral’ to ‘overweight’.