New Delhi: India’s equity market narrative in 2026 is expected to move away from broad-based rallies and shift towards selective, fundamentals-driven opportunities, as investors grapple with elevated valuations
and uneven global growth, a new report said on Wednesday.
While strong domestic macro conditions and a gradual earnings recovery remain supportive, the data compiled by Client Associates said disciplined stock selection will be key in navigating the year ahead.
The asset management firm said Indian equity markets are likely to remain supported by healthy domestic demand and improving macro conditions, with a gradual recovery in corporate earnings expected through 2026.
However, it cautioned that global uncertainties and stretched valuations could limit near-term upside, making careful selection of fundamentally strong companies crucial for investors.
According to the report, India’s economic outlook remains constructive, with GDP growth for FY26 revised upward to 6.8 per cent despite heightened geopolitical risks.
This growth is expected to translate into sustained domestic demand, better revenue visibility for companies and improved earnings potential, particularly in consumption-led sectors.
Client Associates projected that the BSE Sensex could rise to 93,918 by December 2026, supported by improving earnings and favourable domestic factors.
At the same time, the report highlighted commodities such as gold and silver as important portfolio diversifiers, while advising caution on fresh investments in silver following its recent sharp rally.
The firm noted that lower tax incidence and supportive government reforms have boosted disposable incomes, leading to higher spending and savings across sectors such as automobiles, insurance and financial products. This trend is expected to continue and support consumption-driven stocks over the medium term.
Nitin Agarwal, Head of Investment Research at Client Associates, said equity markets in 2026 are likely to reward disciplined investing. He noted that while India’s domestic strength and improving earnings outlook remain supportive, investors will need to focus on fundamentals amid global uncertainty and elevated valuations.
“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,” said Nitin Agarwal, Head of Investment Research, said.
The report also expects earnings growth for Sensex companies to remain subdued in the near term before picking up over the medium term, helped by improving macro conditions and accommodative monetary policy. It added that select sectors are likely to outperform as the market shifts to a more selective, fundamentals-led phase.
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