The markets have closed the penultimate week of 2025 in green, with the Nifty managing to hold its head above the crucial 26,000 mark. However, a few weeks ago, Siddhartha Bhaiya, MD & Chief Investment Officer of Aequitas Investment Consultancy flagged key concerns, saying that “we are in a bubble of epic proportions.” This comment worried many on the street. But is there a risk of a bubble in India now? On FinancialExpress.com, we reached out to a host of gurus for their views on the market and what lies ahead-
6 market gurus on the prospects for the market in 2026
Here are some expert views on what lies ahead for the market –
Market not in a bubble, but some sectors are
Manish Sonthalia, Director and CIO of Emkay Investment Managers pointed out that the market as a whole may not be in a bubble zone, but he is concerned about select stocks and sectors, “Indian markets are not in a bubble zone, but there are certain sectors and stocks which are. I am ‘Overweight’ on India – and I see Indian equities turning around from ‘underperformance’ this year. A strong GDP growth, earnings recovery, low interest rates, and reasonable valuations on many sectors for his bullish outlook.”
Double-digit returns likely in 2026
Well-known fund manager and industry veteran Sandip Sabharwal of Asksandipsabharwal.com ruled out the prsopect of a bubble and is confidents of robust returns in the new year, “No India is not in the midst of a Bubble. Indian equity markets enter the New Year with a strong setup for fresh highs. FII ownership is at multi-decade lows, while India’s valuation premium to emerging markets is near historical troughs, creating a favourable risk-reward.”
He added that, “supportive monetary policy, improving liquidity, and a weaker rupee enhance global competitiveness for exporters. A revival in consumer demand, aided by GST rationalisation and direct tax cuts, should support earnings momentum. Additionally, potential positives from a US trade deal and tariff reductions could further boost sentiment. Broader markets should perform well in fundamentally strong stocks, avoiding abnormally priced, story-driven narratives. The overall outlook is positive with potential double-digit returns possible in 2026.”
Valuations stretched but not a clear bubble
Market veteran, Ajay Bagga too seemed upbeat about the prospects in the new year, “In 2025, the Indian stock market did not enter a clear bubble despite lofty valuations in pockets; rather, it underperformed both developed markets and many emerging markets (EMs), trailing peers as global AI-led rallies lifted the US and select Asian indices while India lagged due to limited exposure to mega-cap tech themes and slower earnings growth. Valuations remain stretched Vs EM historic averages, though closer to global norms, and over half of Nifty stocks trade in ‘overvalued zones’, raising caution. With weak catalysts and muted earnings momentum in 2025, the 2026 outlook hinges on macro support, earnings revival, and policy drivers to sustain gains.”
According to him, “the three key catalysts could boost Indian markets in Q1, CY2026 – firstly, the earnings season could see upgrades coming in after 5 quarters of predominant downgrades. Secondly, there is an expectation of an EU and US trade deal, which could boost sentiment. Third is the Union Budget 2026, which could provide an impetus via fiscal stimulus and policy announcement.”
He believes that the “stability of the Indian rupee will help as well, as the 6% plus fall in the rupee in CY2025 hurt returns for foreign investors and was a contributory factor in FPI outflows as well.”
Market not in a bubble
Siddhartha Khemka, Head of Research, Wealth Management, Motilal Oswal Financial Services too ruled out bubble concerns with respect to Indian equity markets, “Basically, the market is not in a bubble. Even in this slackish year, the Nifty has given you about an 11% return. Just because the Nifty is near a high doesn’t mean that we are in a bubble; the market has been consolidating. Even valuations when we look at them – there is no sign of heating up. When you say bubble, it is a phase when things are going up without any justification, without any fundamentals, without any reason. That is not the case currently.”
According to Khemka, “the market is on a steady footing. Earnings-wise, after 3 years of strong double-digit earnings growth, we have seen slower growth for 2 years. So, this year’s earnings growth will be better than last year, closer to 9% with recovery in the second half. FIIs have been huge sellers this year, so their selling will reduce. Macro-wise, interest rates have come down, that should spur investments whenever demand picks up. Plus, there is a consumption boost. So next year we are expecting 12-14% earnings growth and up to 15% Nifty returns.”
India- An opportunity, not a bubble
Deven Choksey, Managing Director of DRChoksey FinServ looks at the current levels as an opportunity to enter, “This is an opportunity, not a bubble. I think we are basically going to see a significantly large amount of growth from here on as far as I think our next 10 years journey is concerned. So certainly I think market has corrected itself the way it should have corrected. It has corrected. I think time correction has happened in the frontline stocks and the price correction has also happened in the mid-cap and small-cap stocks. From here on, I think the earnings growth and the larger part of the visibility of earnings will drive the market.
Expect another year of consolidation
Siddarth Bhamre, Head Institutional Research-Asit C. Mehta Investments Intermediates explained, “Indian markets are no more in a state of acute bubble after one year of market consolidation. We believe one more year of consolidation and double-digit earnings growth would bring markets completely out of the overvaluation zone. The higher the market consolidates and earnings grow, the lower the chances of any major correction.”
He pointed out that “there have been two opposite liquidity forces working in markets. FIIs have been selling, and retail in the form of MFs has been buying this market. Retail investors’ patience will be tested in 2026 if markets continue to deliver no or very low single-digit returns. This can trigger some redemption. However, this supply could be countered by the return of some FIIs for whom the Indian market would once again start looking attractive based on depreciated local currency and fair valuation. One more year of consolidation and earnings catching up is a best-case scenario for us in 2026.”
Most market experts see 2026 as the year when double digit returns make a strong comeback for the markets. This is backed by expectations of robust earnings growth. The FII outflows have been another key concern for the Indian markets through 2025. Many believe that 2026 could also fix this.