Rupee Under Pressure: What This Means for Indian Stocks & Your Portfolio

Will the Indian rupee's weakening trajectory hurt your stock market returns? What if the Nifty 500 can reverse its underperformance trend in 2026?

In a recent interview, Shahzad Madon, MD and CEO of TCG Asset Management Company, shared his insights on the Indian stock market outlook, the rupee's movement, and interest rate trajectories.

The Indian rupee is expected to remain on a weakening trajectory over the medium to long term, while the Indian stock market is well-positioned to deliver returns in the low to mid-teens in 2026, supported by improving earnings and a constructive macro backdrop.

Original Analysis

Historically, the Indian stock market has performed well during periods of earnings growth and low inflation. With the current macroeconomic setup, we can expect a broad-based earnings revival in the next few quarters. The Nifty 500, which has underperformed the Nifty 50 by nearly 10% since late 2024, may reverse this trend in the coming year.

From a trader's psychology perspective, the Indian market tends to react positively to positive earnings surprises and negatively to earnings downgrades. With the earnings downgrade cycle likely over, we can expect a shift in market sentiment towards positive earnings growth.

In terms of market context, the Bank Nifty has been a key driver of the Nifty 50's performance. With the RBI's rate cuts and the low-inflation environment, we can expect the banking sector to perform well in the coming year.

What Should Traders / Investors Do Now?

• Intraday traders: Focus on stocks with high liquidity and tight bid-ask spreads to minimize trading costs. Keep an eye on market volatility and adjust your stop-loss levels accordingly.
• Short-term traders: Look for stocks with positive earnings momentum and strong technical charts. Consider sector rotation strategies to benefit from the broad-based earnings revival.
• Long-term investors: Consider investing in a diversified portfolio of stocks with a strong earnings growth potential. Keep an eye on valuations and adjust your portfolio accordingly to maintain an optimal risk-return profile.

Frequently Asked Questions

• Will the Nifty 500 reverse its underperformance trend in 2026? Yes, with the broader market's relative attractiveness and expected earnings growth, the Nifty 500 may outperform the Nifty 50 in the coming year.
• Is the rupee's weakening trajectory a concern for Indian stocks? No, while a weak rupee can impact exports, the Indian stock market has historically performed well during periods of earnings growth and low inflation.
• What should retail investors watch next? Retail investors should keep an eye on earnings announcements, macroeconomic data, and global market trends to make informed investment decisions. Follow #IndianStockMarket and #Nifty500 for the latest updates.

Disclaimer: This article is for educational purposes only and should not be considered as investment advice. Investors are advised to consult with certified experts before making any investment decisions.