Market Outlook Stays Range-Bound Amid Tightened Funding Norms

The Indian stock market is expected to remain in a range-bound phase over the medium term, according to analysts at SKG Investment. While the long-term trend remains positive, market experts anticipate a cautious recovery for the remainder of 2026, with investors advised to monitor macroeconomic indicators closely for signs of stability or disruption.

Proprietary traders are facing immediate liquidity constraints due to recent regulatory shifts. The Reserve Bank of India has implemented stricter funding norms that limit the use of bank overdrafts for margin requirements. This change is particularly impactful for traders participating in weekly Nifty and Sensex options, as the availability of collateral for high-frequency expiry-day trading has tightened significantly.

Analysts suggest that market participants are rotating out of speculative segments and toward more fundamentally robust sectors. Defense, financial services, and pharmaceutical stocks remain the preferred areas for capital allocation during this period of consolidation. The regulatory environment suggests that firms with stronger balance sheets and less reliance on leverage may outperform as the market adjusts to the current liquidity landscape.