NEW DELHI — India’s equity markets are expected to shift away from broad-based rallies in 2026 and move toward more selective, fundamentals-driven opportunities as investors contend with high valuations and uneven global growth, according to a new report released on Wednesday.
Despite supportive domestic macroeconomic conditions and a gradual recovery in corporate earnings, the report by Client Associates said disciplined stock selection will be essential for investors navigating the year ahead.
The asset management firm said Indian equities are likely to remain underpinned by healthy domestic demand and improving macro conditions, with corporate earnings expected to recover gradually through 2026. However, it cautioned that global uncertainties and stretched valuations could cap near-term gains, increasing the importance of focusing on fundamentally strong companies.
According to the report, India’s economic outlook remains constructive, with GDP growth for FY26 revised upward to 6.8 percent, even as geopolitical risks remain elevated. This growth is expected to support sustained domestic demand, improve revenue visibility for companies and enhance earnings potential, particularly in consumption-driven sectors.
Client Associates projected that the BSE Sensex could rise to 93,918 by December 2026, supported by improving earnings momentum and favorable domestic factors.
The report also highlighted commodities such as gold and silver as useful portfolio diversifiers, while advising caution on fresh investments in silver following its recent sharp rally.
Lower tax incidence and supportive government reforms have boosted disposable incomes, leading to increased spending and savings across sectors including automobiles, insurance and financial products, the firm said. This trend is expected to persist and support consumption-oriented stocks over the medium term.
Nitin Agarwal, Head of Investment Research at Client Associates, said equity markets in 2026 are likely to reward a disciplined investment approach.
“Equity markets in 2026 are likely to be driven less by broad-based rallies and more by selective opportunities anchored in fundamentals. India’s domestic macro strength and improving earnings outlook remain supportive, but elevated valuations and global uncertainties call for a disciplined approach,” Agarwal said.
The report added that earnings growth for Sensex companies is expected to remain subdued in the near term before strengthening over the medium term, aided by improving macroeconomic conditions and accommodative monetary policy. Select sectors are likely to outperform as the market transitions to a more selective, fundamentals-led phase. (Source: IANS)
