Stock Market Outlook: As India approaches 2026, investors are navigating a market landscape shaped by currency volatility, selective sectoral strength, and evolving growth drivers. According to a recent report by global brokerage house CLSA, the broader narrative is no longer about headline momentum but about identifying sustainable themes across consumption, infrastructure, technology, and financials.
The report captures a moment where India’s macro fundamentals remain intact, even as near-term challenges test sentiment.
Indian Rupee Weakness
CLSA noted that the Indian rupee crossed the 91-mark against the US dollar in December 2025, marking a depreciation of over 5.5% for the year. However, the brokerage highlighted that this move has been gradual rather than disruptive, making it one of the slowest depreciation phases seen in the past 15 years.
The report attributed the currency weakness primarily to lower foreign capital flows and speculative positioning, rather than a deterioration in domestic fundamentals. It added that any such weakness has historically reversed when viewed through real effective exchange rate trends.
Stock-specific conviction: DMart, TCS, and autos in focus
DMart: Among individual stock themes, CLSA devoted detailed attention to Avenue Supermarts (DMart), framing it as a long-term free cash flow story. Drawing comparisons with global retailers such as Walmart and Costco, CLSA noted that rapid store expansion typically results in negative or minimal free cash flow in the early years.
DMart is expected to remain in this phase for the near term, with store additions projected at 15–20% annually and management visibility extending to 2,200 stores. CLSA maintained that DMart’s long-term demand environment remains favourable. The brokerage also highlighted that quick commerce is expected to account for less than 20% of urban consumption even by FY35, leaving significant room for DMart’s physical retail model. To further add value, DMart is expanding its private label portfolio, offering products priced 40- 50% lower than branded alternatives and sometimes even one-third of the price, added the brokerage.
Ashok Leyland: In the auto sector, CLSA flagged early signs of a revival in the commercial vehicle cycle, supported by improved freight demand and lower upfront costs following GST cuts. The brokerage expects Ashok Leyland to deliver a 10% medium and heavy commercial vehicle volume CAGR over FY27–28, which could lift EBITDA margins to 13.5% through operating leverage and pricing discipline. CLSA advised investors to focus on manufacturers rather than lenders, noting that financing growth tends to lag disbursement recovery.
IT sector
In IT space, CLSA observed that the conversation is beginning to move beyond artificial intelligence hype. Discussions with companies such as Infosys, HCLTech, Wipro and Persistent Systems indicated no major change in near-term demand conditions, with spending still skewed toward cost optimization and vendor consolidation.
However, CLSA pointed out that AI-led deflation is being offset by incremental work volumes, resulting in steady order book growth in Q3. The brokerage expects Infosys to report strong order book growth, driven by the NHS deal valued at USD 1.6 billion over 15 years.
Tata Consultancy Services (TCS): CLSA highlighted that TCS disclosed annualized AI services revenue of USD 1.5 billion for the first time, alongside next-generation services revenue of USD 11 billion. The company outlined a five-pillar strategy aimed at becoming the world’s largest AI-led tech services organization, spanning internal transformation, service redesign, talent development, client solutions and ecosystem partnerships.
Amber EnterprisesCLSA said that Amber Enterprises indicated industry-leading growth in air-conditioning and a stronger medium-term outlook for other segments. The brokerage noted that Amber reiterated a robust pipeline through organic PCB manufacturing projects such as Ascent Circuits and Korea Circuits, along with ramp-up of recently acquired capacity. Amber guided for 40%–45% growth in electronics in FY26 with margins of 8%–9%, supported by organic and inorganic expansion. PCB projects under the ECMS scheme are expected to generate revenue from FY27 and FY28, while incentive benefits could lift margins and ROCE.
Summing up its outlook, CLSA stated that India’s market environment heading into 2026 is defined by selective opportunities rather than broad-based rallies. As the report put it, “The silver lining is that there is no sudden deterioration in economic fundamentals,” even as global and currency-related uncertainties persist.
For investors, the message from CLSA is clear: focus on companies with visibility, structural advantages and balance-sheet strength. Whether through DMart’s long-term retail expansion, TCS’s evolving AI strategy, or Ashok Leyland’s leverage to a recovering CV cycle, the report underscores that India’s next phase of returns is likely to be built stock by stock, not index by index.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
