In Mumbai, India's financial capital, the market outlook for 2026 appears to be tempered, as highlighted by CLSA's Vikash Kumar Jain. He anticipates muted returns for the year, projecting high single-digit gains as the most optimistic scenario. Several factors, including fewer policy announcements, valuation constraints, and a gradual de-rating, are expected to shape market dynamics. While the market may face challenges, Jain emphasizes that certain sectors like consumption, real estate, and IT hold potential for growth.
According to Jain, the economic landscape in 2026 will markedly differ from previous years. The absence of significant policy interventions, such as income tax cuts or changes to the Goods and Services Tax (GST), means that investors should brace for a period characterized by fiscal consolidation and careful evaluation of past measures. Jain states, "We are not expecting any fireworks," indicating that market participants should manage their expectations regarding dramatic shifts.
Despite the moderate outlook, Jain observes that India's reduced valuation premium following its underperformance in 2025 has made Indian equities more appealing to global investors. This shift could position India as a viable portfolio hedge amid global uncertainties, although the anticipated returns may not be as robust as in previous years.
In terms of sectoral preferences, CLSA is placing increased emphasis on consumption, particularly in retail and quick commerce segments. Jain notes an overweight stance on discretionary spending, consumer staples, and select automotive stocks, suggesting that these areas could provide resilience even when overall market returns lag behind earnings growth.
Additionally, real estate emerges as a favored sector due to the beneficial effects of prolonged low-interest rates. Jain believes that this area could flourish, supporting the notion that certain sectors can thrive even in challenging market conditions. Overall, while the broader market may face a phase of gradual de-rating, Jain expresses optimism regarding earnings growth, indicating that careful sector selection will be crucial for investors in navigating the landscape of 2026.
