After a year of ups and downs, experts say India's stock market is set for steady growth in 2026.
Current Market Snapshot
On December 24, the Sensex slipped 0.14% to 85,408.70 and the Nifty 50 fell to 26,139.70, ending the day in the red. Despite this dip, the indices are trading close to all‑time highs and have risen about 10% year‑to‑date.
Why 2026 Looks Positive
Motilal Oswal sees a clearer path forward for 2026, driven by three main factors:
- Improving corporate earnings – companies are reporting better profit numbers after a slowdown.
- Supportive government policies – upcoming budget measures and ongoing reforms should boost business activity.
- Continued structural strengths – a young population, growing digital use, and more household savings being invested in markets.
Valuation Snapshot
Large‑cap stocks look fairly priced after the recent consolidation. The Nifty‑50’s forward P/E is about 21.5×, just a touch above its long‑term average of 20.8×. Mid‑cap and small‑cap stocks are still pricey, trading roughly 26% and 50% above their historic averages, so investors should pick companies with strong balance sheets and clear earnings visibility.
Sector Picks for 2026
- Financials – steady credit growth, good returns and solid balance sheets keep this sector attractive.
- Consumer discretionary & autos – demand is picking up, helping revenue growth.
- Industrials & capital goods – government spending on infrastructure and localisation drives opportunities.
- IT services – global tech spend is slowly recovering, with a focus on digital transformation, AI and efficiency.
What Happened in 2025?
2025 was a year of consolidation. After hitting record highs in September 2024, the market corrected until early April 2025, partly due to US trade tariffs. Global trade tensions, foreign fund outflows and currency swings kept the market range‑bound. By December, the Nifty reclaimed most of its losses and even set a new high of 26,325.
Mid‑caps managed a modest 6% gain, while small‑caps fell about 6% after strong rallies in 2023‑24. The Reserve Bank of India helped stabilize the market with four repo‑rate cuts totalling 125 basis points, bringing the policy rate to 5.25%, and a 100‑basis‑point CRR cut that improved liquidity.
Looking Ahead to 2026
With earnings becoming clearer, policy support expected from the 2026 budget, and the possibility of resolving US tariff issues, the outlook for Indian equities appears favorable. Investors are advised to stay disciplined, focus on high‑quality businesses, and view market volatility as a chance to build positions in companies aligned with India’s long‑term growth themes.
Disclaimer
Remember, this is perspective, not a prediction. Do your own research and consider your risk tolerance before making any investment decisions.