https://gradedfinserv.blogspot.com/2025/11/indias-market-momentum-2026-by-thakur.html
India Equity Market Outlook
India's Market Momentum 2026
Executive
Summary:-
The Indian stock market environment is becoming increasingly favourable for
investors, supported by global currency trends, resilient domestic
fundamentals, and sustained growth prospects.
Global Context: The U.S. Dollar and Global Liquidity:-
The U.S. Dollar Index (DXY), which measures the USD against a basket of
major currencies, is showing signs of weakness, down by around 8.2%
year-to-date. According to the Federal Reserve Bank of St. Louis, the U.S.
dollar has been on a clear path of depreciation since January 2025.
However, against the Indian Rupee (INR), the dollar remains stronger than a
year ago, though it has recently shown signs of stabilization or mild weakening
; a positive sign for the rupee.
Historical Context:
- Periods of USD weakness (e.g., 2003–2007, 2010–2012, and mid-2020 to early
2021) have coincided with strong FII inflows and bull runs in Indian
equities.
- Conversely, USD strength (2013 “Taper Tantrum,” 2018, 2022–2023) led to
capital outflows and rupee depreciation.
Implication:
A softening dollar typically leads to rising FII inflows, a strengthening
rupee, and higher stock market valuations - especially in sectors like banking,
consumption, and infrastructure.
Additionally, the U.S. faces significant fiscal challenges, with national debt
exceeding USD 37.8 trillion, and record-high interest payments, creating a
conducive backdrop for emerging market flows.
India: Domestic Strengths and
Economic Momentum:-
1. GST Collection: Record high
in April 2025 at ₹2.37 lakh crore, rising 9.1% YoY.
2. Corporate Earnings: Expected
to grow up to 14-16% in FY26–27, with 10%
growth in Q4 FY25.
3. Inflation: Headline inflation eased to 1.54% in September 2025,
indicating price stability.
4.Trade and Tariff Agreements:
Ongoing and prospective agreements
with the EU, UK, Canada, Australia, and likely the USA are expected to boost
exports.
5. Capital Expenditure Revival:
- Budgeted central government capex
for FY26 is ₹11.21 lakh crore.
- Over FY20–FY25, capex grew at an
average annual rate of 38.8%.
6. Consumption Drivers:
Factors such as GST reforms, RBI rate cuts,
above-average rainfall, tax rationalization, and the upcoming 8th Pay
Commission are supporting demand.
7. GDP Outlook:
- IMF projects GDP growth at
6.4%.
- S&P Global and World Bank have
upgraded their forecasts to 6.5%, while Fitch estimates 6.9% for FY26.
8. Sectoral Growth Opportunities:
- Key sectors: Auto, FMCG, Defense,
Semiconductors, Mobile Telephony, Financial Services, and Technology.
- Government initiatives under ‘Make
in India’ continue to support domestic production and exports.
Investment Strategy: Positioning for Growth
As Indian equities appear poised for a new bull phase, investors are advised to
adopt a structured and research-driven approach.
Recommended Strategy
1. Portfolio Audit:
Conduct a comprehensive audit of
existing holdings and rebalance towards quality instruments - Mutual Funds, PMS,
AIF, ETFs, Direct Equity, FDs/Bonds. Whichever are underperforming or less
credible – can be sold.
2. Mutual Fund Allocation:
Consider both lump-sum investments and
SIPs in high-quality, diversified funds. Also invest in Gold / Silver through
SIP Mode
3. Suggested Asset Allocation (Indicative):
- 50% – Mutual Funds
- 15% – Direct Equity
- 15% – Silver & Gold (via ETFs /
Mutual Funds)
- 20% – AAA / AA+ Rated Corporate FDs
or Bonds
Conclusion:
India stands out as one of the most promising markets globally in 2025–2026.
The combination of macroeconomic stability, policy-driven growth, and
favourable global liquidity conditions offers a fertile ground for long-term
wealth creation. Strategic and disciplined participation in equities and
related instruments can yield significant gains in the upcoming growth phase.
Thakur Ajit Singh
Founder, Graded Financial Services - A
Mall of Financial Products & Services.
M/S Quick Turtle – Executive Placement & Training Company
