Sankaran Naren, ED and CIO, ICICI Prudential Mutual Fund, believes that if there is correction in global markets, particularly the US, Indian equities are expected to do relatively better in 2026. Naren tells Joydeep Ghosh that if initial public offerings (IPO) are well-priced, the boom would continue. Excerpts:
Many brokerages have predicted that 2026 will be a year when the Sensex crosses 100,000 points and the Nifty around 29,000. Do you think these numbers are achievable?
From a macroeconomic perspective, India is in a very good shape. In 2025, three important developments in the form of income tax cuts, GST reductions, and a significant decline in interest rate provided meaningful support to the economy. These measures together have created a supportive environment for growth going into 2026.
From a market standpoint, the relative positioning has also improved. At the beginning of 2025, India was relatively more expensive compared with global peers. Since then, global markets have performed much better. As a result, on a relative valuation basis, Indian equities today are cheaper than earlier and compare more favourably with many global markets.
However, the trajectory of Indian markets will also depend on global developments, particularly the US market, which is currently very expensive. If global markets remain stable, Indian equities can have a good year. In case if there is a global correction led by the US, India is likely to outperform on a relative basis.
Though 2025 was tepid for the benchmark indices, mid- and small-cap stocks corrected marginally. Do you think there is still froth in these segments?
In the smallcap space, froth has come off meaningfully. However, smallcap cycles tend to be longer in duration, and therefore it is time for only systematic investment in smallcaps. Midcaps, on the other hand, continue to appear overvalued. Despite this, there is no clear indication that a correction is imminent. One of the reasons for this is the limited availability of floating stock in the midcap space. While valuations are elevated, supply constraints have so far prevented a meaningful correction, making this segment particularly challenging to assess.
Mutual funds have received steady money during this lean period. Do you see this trend continuing?
This trend is likely to continue as mutual funds have delivered a much better investing experience over time, especially through hybrid funds. These products have helped investors manage volatility more effectively and have played an important role in asset allocation. As a result, investors have continued to allocate money to mutual funds even during periods when equity markets have been relatively subdued. The structure and discipline offered by MFs, particularly in asset allocation strategies, remain one of the key reasons for the steady inflows besides the robust SIP inflows.
Naren on current market conditions
What strategy should retail investors follow in the current market conditions?
The most important aspect for retail investors is to continue with asset allocation discipline, maintain a long-term perspective and avoid reacting to short-term market movements. Given that markets can be volatile and outcomes uncertain in the short run, a consistent approach focused on asset allocation helps investors manage risk, coupled with systematic investment plans with a long-term view remains an effective way to navigate market cycles. Precious Metals like gold and silver have done very well last year and investors need to be careful while making standalone investment in precious metals.
The delay in the US trade deal has put pressure on the rupee. Do you see it bouncing back once it is done?
A recovery in the rupee against global currencies is likely once the trade deal is concluded. While directionally a strengthening is expected, how significant the move would be can’t be predicted.
Naren’s sector-wise prediction
Which sectors are expected to do well in 2026?
In general, most sectors have already performed well. That said, on a relative basis, some quality sectors such as FMCG, pharma and IT, which have been underperformers so far, may offer better outcomes on a risk-adjusted basis.
The IPO market has seen two very good years. Do you see this continuing?
The continuation of a healthy IPO market will largely depend on pricing discipline. If IPOs are reasonably valued and investors do not lose money, the trend can continue. On the other hand, if pricing becomes excessive and investors start losing money, the enthusiasm could diminish. Reasonable valuation is, therefore, essential for sustaining the momentum in the primary market.
