The markets are poised interestingly. The Nifty has broken below its 200-day Simple Moving Average, FII outflows continue and global headwinds remain a key concern. Meanwhile, on the domestic front, all eyes are on the big event at the end of this week- the Budget announcement for FY27.
The key concern is, can the strong growth and consumption in the domestic market help offset the key geopolitical risks? Most fund managers we spoke to indicated that India is gradually more of a stock picker’s market, and lazy profits are probably dead.
Earlier on Financialexpress.com, we caught up with leading fund managers on ‘how to invest Rs 10 lakh in 2026’ as part of a quarterly series. Here is a quick look at the key factors that they believe will drive market movement going forward this year.
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Expect measured return, need for disciplined approach
One of the country’s leading fund managers, Anand Shah, CIO PMS & AIF – ICICI Prudential AMC believes that the “next phase of equity market returns is likely to be more measured. The returns would be driven by bottom-up stock selection rather than broad market trends.”
He sees the Indian equity market poised at “an important inflection point.”
Though domestic growth indicators such as GST collections, credit growth, and capex traction have the “potential to lead to an earnings recovery,” he pointed out that the “global macro uncertainties and elevated valuations warrant a disciplined investment approach.”
Earnings set to be significantly higher
However, one common thread that connects most analysis is the expectation that earnings growth will perhaps finally see the pick up that everyone has been anticipating for the past few quarters. Brijesh Ved, Head-PMS, Kotak Mahindra AMC, pointed out that, “CY2026 can see strong recovery in earnings of the market; we are more confident about decent earnings recovery in most sectors.”
Market veteran Ajay Bagga is betting on “India’s domestic resilience,” coupled with the fact that “60% of the capital is staying home to capture the steady double-digit earnings growth.” He anticipates “a cooling valuation environment in large caps as Indian markets witness a mean-reversion, catch-up trade in 2026.”
According to Ved, the improved domestic consumption demand “on the back of GST and income tax rate cuts and lower interest rates and a likely better macro,” are positive factors but “there was wide variance in performance across sectors and stocks.”
The overall economic outlook for India, Ved added, “reflects strong resilience and promising growth potential, even amid global slowdowns, tariff tensions, and currency pressures.”
Can AI be the big gamechanger?
However, India’s relatively nascent AI investment is often seen as a concern. Sandipan Roy, CIO – Motilal Oswal Private Wealth believes “the current global macro environment reflects a phase of normalisation after an extended period of optimism, alongside rising geopolitical risk. Momentum in AI-led capex and earnings expectations is moderating as the focus shifts from hype to execution and monetisation.”
Market veteran Ajay Bagga also believes that the overall investment strategy at the current juncture should seek to “capitalise on the AI productivity harvest of 2026 while maintaining enough diversification to withstand geopolitical noise.”
However, Sandipan Roy conceded that Indian markets are at an interesting point, with “investors at tenterhooks due to ongoing uncertainties, but VIX, the measure of perceived risk, is at multi-year lows.”
The ‘K-Shaped’ resilience
The big question then is can India’s domestic resilience stand tall amid geopolitical risks. Ajay Bagga pointed out that “There is a two-speed ‘K-shaped’ stability. We expect global growth to continue, with India being the leading major economy in terms of GDP growth.”
Deven R Choksey, Founder and MD of DRChoksey Finserv added that India enters 2026 with strong domestic growth, GST rationalisation and tax relief. “With the RBI having cut rates and likely pausing, interest rates remain supportive for both equities and bond markets,” he added.
The big focus is on India’s domestic strength at the core while managing global uncertainties.