Dr. Ravi Singh of Master Capital Services said Indian equity markets have entered 2026 on a cautious note amid rising geopolitical risks, rising uncertainty around trade policies and mixed Q3 expectations. Going ahead, he expects the Budget to be a key market-moving event, wherein he expects the focus to be on capex-led growth. He further shares his Budget expectations, ideal portfolio and outlook for 2026. Edited excerpts:
Indian macro picture remains strong, but it has not translated into gains for the equity markets. What explains this?
Earlier strong rally in the Indian equities already took the market trading to expensive valuations, and some moderation in quarterly earnings along with added pressure from tariff-related uncertainty, naturally triggered a period of correction and consolidation for Indian equities in 2025. However, with supportive government policies, sustained focus on demand, and easing domestic financial conditions, the positioning of the market has meaningfully improved.
What is your outlook for the main index and the broader market in 2026?
Indian equity markets have entered 2026 on a cautious note after correcting more than 500 points from the all-time high zone of around 26,370 on the Nifty. The recent decline has been driven by expectations of mixed Q3 earnings, global uncertainty around trade policies, and risk-off sentiment following renewed tariff concerns from the US. From a technical perspective, the Nifty has broken below its medium-term uptrend line and is currently trading below the 50-day EMA, which had earlier acted as a key support.
If the index sustains below the 50-day EMA, downside levels of 25,550–25,400 could be tested in the near term. However, a decisive reversal and close back above the 50-day EMA would indicate strength returning, opening the path toward the previous all-time high zone. At this stage, the market appears to be in a transition phase, and a clear trend will emerge only after the next directional move.
Looking ahead, key events such as the Union Budget, expectations of capex-led growth, and sectoral tailwinds in areas like defence, railways, infrastructure, banking, and manufacturing could support the broader market. While short-term volatility is likely, India’s structural growth story remains intact, and the market is expected to end 2026 with positive returns, continuing the long-term bullish trend seen over the past decade.
If an investor were to create a portfolio for 2026 with ₹1 lakh — What would be the ideal capital allocation strategy?
If an investor is starting a ₹1 lakh portfolio for 2026, the key at this stage is to be well diversified and patient, not aggressive. Markets have corrected from highs and are still dealing with global uncertainties like trade tensions, interest-rate outlooks and mixed corporate earnings. So, deploying all the money at one go may not be the best idea. A staggered approach over the next few months can help manage volatility better.
In terms of allocation, around 40–45% can be kept in large-cap stocks, especially banking and financials, which continue to benefit from steady credit growth and strong balance sheets. Another 30–35% can be allocated to sectors linked to government spending and policy support, such as defence, railways, infrastructure and manufacturing, where order visibility remains strong.
Around 15% can be selectively invested in quality mid-cap stocks with clear earnings visibility, while avoiding speculative names. Keeping 10% in cash is important, as it provides flexibility to buy during market dips. This kind of allocation helps investors stay invested in growth themes while protecting capital during short-term market swings in 2026.
What are your expectations from this Budget? Do you see any big-bang reforms?
The Union Budget 2026 is expected to prioritise the capex-led growth continuity, and PLI lead domestic investment push. The focus will likely be on adjusting and enhancing existing frameworks to stimulate private investment. Budget is likely to focus on the PLI scheme to frontier domestic manufacturing and incentives for certain areas to maintain growth traction. Most big reforms are already taken by the government in recent times. Overall, the budget framework is expected to be aimed at building a resilient domestic economy and capabilities, amid persistent global and trade-related uncertainties.
Can you share the top sectoral bets for this year? Any sectors you would recommend investors to avoid?
From an investment perspective, the focus should be wide-ranging and distinctly bottom-up, centred on segments that benefit from strong policy support and visible demand expansion. Instead of following broad index themes, investors would be better served by spotting areas where fresh capacity, improving business trends, and long-term demand drivers are coming together. Renewable energy and its ecosystem, consumer discretionary, telecom, and infrastructure-linked businesses appear particularly well placed. Priority to companies with predominantly domestic revenue streams, scalable business models, and sound balance sheets, while maintaining discipline on valuations.
Do equities still offer better risk-adjusted returns compared to bonds, gold, or cash?
Indian equities in 2025 underperformed all major markets globally, seems positioned for a comeback, driven by domestic tailwinds and strong GDP-led earnings growth. Strong domestic factors are creating a cushion against recent external uncertainties, including tariff-related risks and geopolitical tensions. On the other hand, RBI’s rate-cutting cycle has diminished the appeal of fixed income asset class, while the commodity’s massive rally is ongoing. However, commodities tend to move in cycles and can be highly volatile, which is why allocating a large portion of a long-term portfolio to them rarely makes practical sense. Whereas equities over a longer time horizon beat all asset classes with their risk-adjusted returns and alpha generation capability, as only investing in businesses provides the opportunity to participate in sustainable economic growth. However, global uncertainties, particularly around tariffs, have emerged as a key overhang, restraining the market momentum.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
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