Outlook for the Indian Equity Market in FY25–26

 

The outlook for the Indian equity market in FY25–26 remains broadly positive, with equities expected to outperform other asset classes. India continues to be among the fastest-growing major economies globally. According to the World Bank, GDP projections for key economies are as follows:

Country	FY2025	FY2026
India	6.3%	6.5%
China	4.5%	4.0%
USA	1.4%	1.6%

 

Several factors support this optimistic outlook:

• ·    Robust domestic demand - as India being the one of the largest consumer marketing in the world.
• ·        GDP growth projection of 6.3–6.5%
• ·        Improved corporate earnings : As of May 18, 2025, earnings results from 878 companies have shown a 10% YoY growth in Q4FY25, although full-year earnings growth for FY25 stood at 5.79%, significantly lower than the 35.1% growth recorded in FY24.
• ·        Easing monetary policy by the RBI (including possible reductions in repo rate and CRR)
• ·        Tax exemptions for individuals increased up to ₹12 lakhs.
• ·   Foreign Portfolio Investors (FPIs) have shown renewed confidence, infusing over $4 billion recently. The Nifty 50 has delivered an 8% return.
• ·   The central government’s fiscal position remains strong, with continued fiscal consolidation expected in FY26.

 

Potential Challenges:-

• ·        Global Uncertainties: Geopolitical tensions and trade disruptions could affect market stability.
• ·   Valuation Concerns: Select mid-cap and small-cap stocks appear expensive, raising caution among analysts.

 

Market Predictions:

 

• ·       Nifty 50: Expected to deliver 12–15% returns in FY26.
• ·      Sensex: Morgan Stanley has projected a target of 89,000 by June 2026, indicating an 8% upside.

 

Investment Strategy:

 

• ·        Diversify portfolios to manage risk effectively.
• ·        Maintain a long-term view to ride out short-term volatility.
• ·        Focus on mid-cap and small-cap stocks with strong fundamentals.
• ·    Book profits periodically, especially with every 5,000-point rise in Sensex—starting from 85,000, then at 90,000, 95,000, and 100,000. Before booking profits:
• §  Assess how much the investment has appreciated.
• §  In case of losses, check whether the investment has completed at least one year.

 

Broader Market Outlook:

I remain constructive on the broader markets, particularly as:

• ·        Concerns about reciprocal tariffs continues to ease, and
• ·        Tensions between India and Pakistan have cooled for now.
• ·        The market saw a V-shaped rally post-tariff pause, and we expect the beta rally to persist. Any meaningful correction should be viewed as a buying opportunity.
• ·    I project Nifty EPS growth of 12–13% in FY26. We may see green shoots of discretionary consumption revival as the impact of monetary easing becomes more visible on the ground.
• ·     That said, investors must remain selective in stock-picking and fund selection, focusing on quality over momentum.

 

 

Author:
Thakur Ajit Singh 
Founder 
Graded Financial Services – A Mall of Financial Products & Services,
Quick Turtle - An Executive Placement Firm,
Chairman, Investor & Consumer Protection Cell, MRCC.
Trainer | Management Consultant.
Cell: 8169810833