Even though India’s stock indexes looked quiet in 2025, the underlying market activity is actually setting the stage for strong profit growth next year.
Why 2025 wasn’t a dull year
DBS Group’s chief economist Taimur Baig says the year was far from weak. Venture capital and private‑equity firms kept the momentum from the 2022‑2024 boom, closing deals with high revenue. This kept capital flowing and created a solid foundation for the future.
Growth outlook for 2026
Baig expects India’s nominal GDP to rise to about 10% in 2026, up from an estimated 9.2% this year. Faster economic growth should push corporate earnings into double‑digit territory for the fiscal year 2027.
Which sectors could benefit most?
- Banking: Higher nominal interest rates are likely to improve banks’ net interest margins, boosting profits.
- Financial services: Overall stronger GDP supports demand for credit and other financial products.
- Export‑oriented industries: Companies in gems, jewellery and similar fields need to look beyond the US for markets.
US uncertainty – the big risk
The biggest unknown for India is the United States, which Baig calls the “gorilla in the room.” He suggests spreading risk by targeting East Asia, Europe and the Middle East for both exports and investment deals.
What foreign private‑equity exits mean
When overseas private‑equity firms sell their Indian stakes, Baig sees this as a positive sign. It shows that patient capital can earn good returns and that local demand is strong enough to absorb these exits.
China’s rising tech role
Contrary to the old view of China as only a tech copier, Baig points to breakthroughs in drug discovery, gene therapy and protein folding. He expects more collaboration between Chinese innovators and Western pharma, and sees China becoming a useful partner for India, especially in electric‑vehicle technology.
Key takeaways for investors
- Look for companies that can benefit from higher interest rates, such as banks.
- Watch firms expanding into new export markets beyond the US.
- Consider the upside from India’s growing partnership with China in high‑tech sectors.
Remember, this is perspective, not a prediction. Do your own research and consider your risk tolerance before making investment decisions.