India likely to outperform global markets in 2026
Mumbai, Jan 4
Sharing his annual outlook for the new year, S Naren, Executive Director and Chief Investment Officer at ICICI Prudential Mutual Fund said 2025 turned out to be a "year of hibernation" for Indian markets, even though the country's macroeconomic fundamentals remained strong.
"India maintained low fiscal and current account deficits, controlled inflation and healthy economic growth," Naren mentioned.
Despite these positives, Indian equities failed to deliver strong returns and the rupee underperformed against most global currencies, including the US dollar.
Looking ahead, Naren believes the situation could change in 2026. He said Indian markets are well placed to do better than most global markets in the coming year.
"India continues to offer one of the strongest growth stories over the next decade, supported by favourable demographics and long-term economic potential," he mentioned.
Naren advised investors to focus on proper asset allocation rather than chasing short-term returns.
He suggested that portfolios could have a slightly higher allocation to equities compared to early 2025, as Indian markets have underperformed many global markets over the past year.
He said this creates an opportunity for investors who are willing to take measured risks.
At the same time, Naren cautioned investors about increasing exposure to precious metals. He noted that gold and silver have been the best-performing asset classes over the past one year and even over longer periods, which has led to stretched valuations.
Silver prices have more than doubled in the last year, while gold prices have risen over 70 per cent, far outperforming equity indices that delivered returns of around 10 per cent.
Naren also highlighted that global risks remain high. He warned that many international markets appear overvalued, especially US technology stocks, and that precious metals are showing signs of excessive optimism.
In this environment, he stressed the need for a balanced and cautious investment approach, combining growth opportunities with risk management as markets head into 2026.
— IANS
Reader Comments
As an NRI investor, I find this analysis very balanced. The caution on US tech stocks and precious metals is timely. I'll be rebalancing my portfolio to increase my India allocation slightly. The demographic story is undeniable.
Finally some sense! All my relatives were rushing to buy gold last Diwali because "it only goes up". This article is a wake-up call. Asset allocation is key, not chasing what did well last year.
"Year of hibernation" is a perfect way to describe 2025. Felt like the market was just sleeping while the economy was doing well. Hope 2026 brings the awakening! Time to SIP with more confidence.
While I agree with the overall optimism, I wish the article gave more concrete sectors to look at. "Indian markets" is too broad. Are we talking manufacturing, infra, IT, or something else? The advice feels a bit generic for the average investor.
The rupee underperforming is a concern for my import business, but if the expert says it's part of a cycle and 2026 looks better, I'll hold on. Our domestic demand story is still the strongest in the world. Jai Hind!
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