Mumbai, Dec 28 (NationPress) As India approaches 2026, the equity market is at a crucial juncture. Following a period primarily influenced by robust domestic liquidity, attention is now transitioning towards earning performance, policy consistency, and the overall economic landscape.

Analysts suggest that this shift could significantly influence the performance of Indian equities in the upcoming year.

The year 2025 presented a mixed bag for investors, with the Nifty reaching an all-time high of 26,326 on December 1 and concluding the year with gains exceeding 10 percent.

Simultaneously, the Sensex experienced an increase of approximately 8 percent across the year. While these returns are commendable, they unfolded amidst considerable volatility, policy ambiguity, and global challenges, rendering the year demanding for market participants.

Market sentiment has been heavily influenced by inflation trends. After witnessing a historic low in October, inflation saw a slight uptick in November.

Nonetheless, it remains significantly below the Reserve Bank of India’s medium-term target of 4 percent.

This scenario has afforded the central bank the flexibility to bolster growth via reduced interest rates. The RBI recently lowered the repo rate by 25 basis points and indicated that it may continue its accommodative approach if inflation remains controlled.

Based on the central bank’s forecasts, consumer price inflation is projected to average 2.9 percent for the three months ending in March, despite a gradual increase anticipated from January.

Brokerage firms are identifying indications of a cyclical rebound. Axis Direct, in a recent communication, indicated that corporate earnings seem to be on an upward trajectory, with growth becoming more evident in financial services, consumption-oriented businesses, and capital-intensive industries.

The firm posits that India stands out among major global markets, where a cyclical upswing is aligning with long-term structural growth drivers.

This synergy, they believe, fosters a supportive atmosphere for equities over both the medium and long term.

Axis AMC shared a similar perspective, characterizing 2026 as a year of rejuvenated energy for Indian markets. It noted that equities have bounced back from last year’s downturn, and valuations are approaching historical norms. India’s valuation premium relative to global counterparts has diminished, while earnings appear to have bottomed out and are beginning to show initial recovery signs.

The fund house highlighted strong policy backing, including interest rate reductions, liquidity injections, accelerated government capital expenditures, and approximately Rs 1.5 trillion in GST reductions. Improving global circumstances, reduced geopolitical tensions, and the potential for an India–US trade agreement could further enhance investor confidence.

Market analysts express greater optimism for 2026 compared to the previous year. They believe that alleviating concerns regarding India–US trade issues could bolster exports and draw foreign investors back to Indian equities. Corporate earnings are projected to improve, fueled by increased government expenditure, stable GST collections, and personal income tax relief. More lenient monetary conditions, healthy credit growth, substantial liquidity within the banking sector, and rising rural incomes are also expected to drive demand.

Sector-wise, experts identify emerging opportunities in financial services, automobiles, select consumer-centric companies, industrials, pharmaceuticals, and telecommunications. Sectors such as hotels and healthcare are also anticipated to benefit from increased consumption and enhanced economic activity. Strengthened corporate and bank balance sheets, coupled with a favorable base effect, could further catalyze earnings growth in the upcoming year.