Expert view on Indian stock market: Pradeep Gupta, Chairman and MD of Anand Rathi Share and Stock Brokerssays 2025 was a year of consolidation, and the market returns will be more earnings-led than valuation-led in 2026. For mid and small-cap segments, Gupta said that well-capitalized companies with pricing power and balance-sheet strength can outperform, but broad-based rallies like the past cycle are unlikely. Edited excerpts:
Nifty is ending 2025 with modest gains. How do you see it poised for next year?
After two years of outsized returns, 2025 has been a year of consolidation rather than disappointment, especially given that India’s equity returns have been positive for the last ten consecutive years. That is a healthy reset.
For 2026, returns are likely to be more earnings-led than valuation-led. If nominal GDP growth sustains in the low double digits, Nifty returns should broadly track earnings growth, with lower volatility than global peers.
Mid and small-caps have underperformed. Can they reverse next year?
The recent underperformance reflects valuation normalization after excesses, not a structural breakdown. Selectivity will be critical.
Well-capitalized companies with pricing power and balance-sheet strength can outperform, but broad-based rallies like the past cycle are unlikely. Dispersion will remain high.
The IT index has corrected significantly. Do you see value emerging?
Valuations have corrected meaningfully, but earnings visibility remains uneven. The sector is transitioning from cyclical headwinds to a structural reset driven by AI, cloud optimization and vendor consolidation. Value is emerging selectively, but this is more a medium-term accumulation story than a sharp near-term rebound.
Which sectors are you positive on for next year? Any emerging segment of interest?
Domestic cyclicals linked to capex, manufacturing and infrastructure remain attractive. Financials with strong liability franchises continue to offer steady compounding.
Among emerging themes, power, defense manufacturing and select digital infrastructure plays are gaining strategic relevance.
What explains the divergent behavior of DIIs and FIIs?
FIIs are driven by global asset allocation, US rates and currency dynamics, while DIIs reflect India’s structural savings shift. The divergence underscores India’s growing domestic capital base, which is now cushioning global risk-off phases and reducing market fragility.
How do you assess India’s macroeconomic condition? Any fault lines?
India’s macro remains one of the strongest among large economies—stable growth, contained inflation and manageable external balances. The key risks lie in global shocks, supply disruptions and uneven private capex recovery, rather than domestic imbalances.
What are your expectations from the Union Budget 2026?
We expect continuity over disruption. We expect the government to focus on fiscal consolidation without compromising growth, sustained public capex, and targeted support for manufacturing and employment generation. Any positive surprise is more likely to come from execution discipline than headline announcements.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of the expert, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
