Positive Outlook for the Indian Stock Market
According to Amnish Aggarwal, Director- Research, Institutional Equities at PL Capital, the Indian stock market is expected to perform well in 2026. He predicts a 12-month Nifty target of 29,000, driven by key themes such as consumption, BFSI (banking, financial services, and insurance), autos and auto ancillaries, defence, and selective opportunities in healthcare.
Key Triggers for Market Growth
The market is expected to be driven by strong agricultural output, moderating inflation, and a revival in consumption demand. Additionally, lower interest rates and progress on a US-India trade deal could act as incremental triggers. Improving consumption can also support private sector capital expenditure (capex) over time.
Mid-Caps and Small-Caps
While mid-caps and small-caps had previously seen higher valuations relative to large-caps, the market tilt has shifted towards large-caps due to better value. However, companies with high earnings visibility and those that have undergone healthy corrections may consolidate and start showing gains over the next three to six months.
Market Outlook for 2026
The market is expected to remain constructive in 2026, driven by income-tax reductions, a normal monsoon, easing inflation, and GST rationalisation. With the RBI revising growth estimates to 7.2%, and expected growth of 6.5-7% next year, double-digit returns from the benchmark indices are expected.
Key Themes for 2026
- Consumption: Expected to drive market growth
- BFSI (banking, financial services, and insurance): Particularly banks and NBFCs (non-banking financial companies)
- Autos and auto ancillaries: Expected to perform well
- Defence: A key theme for 2026
- Selective opportunities in healthcare: Expected to provide growth opportunities
India-US Trade Deal
The market has not fully discounted a trade deal, and a meaningful agreement could provide a clear boost to labour-intensive export industries. The contours of the deal are still unclear, and a positive outcome could prompt a favourable market reaction.
Union Budget Expectations
The market expects the government to continue its fiscal consolidation efforts, aiming for a further reduction in the fiscal deficit. Sustained investments in capital expenditure and other soft-infrastructure priorities are also expected to continue. While major tax reforms have already been undertaken, targeted adjustments to allocations and ongoing reforms are expected in the coming year's budget.