Indian equities are expected to have a positive outlook supported by a recovery in private capital expenditure, a strong real estate cycle, and continued government infrastructure spending. HSBC Mutual Fund highlighted increasing investments in manufacturing, renewables, and supply-chain localization as factors contributing to earnings visibility and market performance up to 2026.
The report emphasized India’s resilient growth amidst global macro-economic challenges, citing favorable factors such as interest rates, liquidity cycle, declining crude prices, and a normal monsoon that are conducive to future growth. Nifty valuations were noted to be slightly above the 10-year average.
The Reserve Bank of India is seen nearing the end of its easing cycle after a recent repo rate cut to 5.25 percent, with expectations of continued supportive liquidity through open market operations. Despite potential volatility in bond yields due to heavy government borrowing, the medium-term outlook for government securities is positive, especially if global bond index inclusions boost foreign inflows.
Indian markets closed December 2025 on a strong note, buoyed by a growth-friendly RBI stance and solid domestic fundamentals, including an 8.2 percent GDP growth in Q2 FY26 and robust industrial output. While foreign institutional investors reduced their Indian equity investments in December, domestic institutional flows and lower crude prices provided stability.
Anticipated support for consumption and investment includes the impact of softer crude prices, global rate reductions, and policy backing through tax and GST cuts. The fixed income markets are forecasted to consolidate with wider trading ranges and increased volatility as the economy nears the end of the easing cycle.
