Vijayakumar anticipates the Indian stock market will deliver returns of 12–15% next year. While this marks an improvement over 2025, he cautions against expecting runaway rallies, citing the need for balanced earnings growth and macroeconomic stability. The strategist highlights the importance of multi-asset strategies, given the underperformance of India compared to other global markets in 2025.
Earnings Drivers and Sectoral Opportunities
Profit growth is expected to be led by automobiles and white goods, which have benefited from recent GST cuts. Operational leverage in these sectors may result in a disproportionate rise in profits relative to revenues. Financials are likely to perform well due to robust balance sheets and low NPAs. Additionally, telecom, hotels, and travel sectors are projected to see steady growth, supported by rising domestic demand and credit expansion.
Impact of Trade and Foreign Investment
Vijayakumar emphasizes the importance of an India-US trade deal, which could help stem rupee depreciation, attract foreign portfolio investments, and support domestic jobs in labour-intensive sectors. The strategist notes that India has so far been a “loser” in the AI trade, losing capital to AI-driven markets like the US, China, South Korea, and Taiwan. This trend may reverse in 2026, benefiting non-AI-dominated markets such as India.
Macro Outlook and Inflation
From a domestic perspective, inflation is expected to remain under control at around 2% for FY26, while GDP growth is projected to exceed 7%. For FY27, Vijayakumar forecasts earnings growth of approximately 15% and CPI inflation around 4%. He notes that continued fiscal prudence, stable credit growth, and supportive policy measures are key to sustaining investor confidence and steady market performance.