Active Investors Could See 22% Gains in 2026

• 63% of Indian market cap is overvalued, but active investors still find opportunities.
• Financials, utilities, industrials offer value; consumer, healthcare, IT are stretched.
• Active portfolios eye 18-22% returns; RBI has policy space; debt not imminent crisis.

New Delhi: Although 63 per cent of total market capitalisation appears overvalued, Indian market’s “inside” still offers rich opportunities for active investors, a report said on Wednesday outlining opportunities in 2026.

The report from OmniScience Capital said that 36 out of 100 large caps and 46 out of 150 mid-caps are undervalued or fairly valued despite Nifty 500’s valuation at over 24 times price‑to‑earnings appears elevated against 11 per cent growth.

The firm cited its analysis of 66 per cent of constituents of Nifty 500 being overvalued but valuation pressure is concentrated in small‑caps. Among small caps, 89 of 150 companies are similarly undervalued or fairly valued, the report said. Within firms above Rs 1,000 crore market capitalisation, around 63 per cent or 246 companies look undervalued or fairly valued, it added.

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Sectoral analysis revealed that financials, utilities and industrials are largely fairly valued or undervalued, with roughly 70, 18 and 83 companies respectively in those sectors. "Whether viewed by market capitalisation or by sector, it is clear that the market continues to offer ample opportunities for active investors to generate alpha," the report said. Conversely, a cautious approach is recommended for Consumer Staples, Health Care, and Information Technology, as these sectors exhibit demanding valuation multiples that appear stretched relative to their mild growth projections, it said.

Despite stretched valuations, there are over 60 companies collectively which are fairly valued or undervalued in these three sectors. The firm forecasted that passive investors can expect high single digits to mid‑teens in 2026 if earnings growth exceeds 15 per cent. Active portfolios targeting mispriced growth opportunities could potentially receive 18–22 per cent returns. Regarding macro space, the report noted that RBI maintains an institutional advantage with a moderate assets-to-GDP ratio, retaining policy space unlike many Western peers. While global public debt has reached historical highs, current levels do not signal an imminent crisis, it noted.

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