Quote on Equity & Debt Outlook 2026 by By Amit Modani, Senior Fund Manager – Fixed Income, Shriram AMC
Below the Quote on Equity & Debt Outlook 2026 by By Amit Modani, Senior Fund Manager – Fixed Income, Shriram AMC
Economic Review: 2025
The year 2025 commenced with a notable shift in the global political landscape, as Donald Trump assumed the U.S. Presidency, influencing a series of key economic themes. The global economy experienced a deceleration in growth, while emerging markets faced headwinds exacerbated by the implementation of new tariffs.
In contrast, India exhibited macroeconomic resilience, recording robust growth accompanied by moderated inflation. This favourable environment facilitated monetary easing, with the Reserve Bank of India (RBI) implementing rate cuts and providing essential liquidity support to maintain stability within the banking system and money markets.
The year is concluding on a more sanguine trajectory than its inception suggested. Despite material disruptions stemming from trade disputes and persistent geopolitical tensions, core macroeconomic variables demonstrated broad resilience throughout the period.
Outlook: 2026- A Year of Stable Macros
The prospective macroeconomic equilibrium and its realization path are uncertain; however, a stable global environment, with U.S. Federal Reserve rates expected to remain stable for most of 2026, alongside accommodative domestic monetary policy, provides a supportive backdrop for the Indian economy.
Monetary Policy and Growth Projections:
Policy rates are projected to enter an extended pause phase. With growth anticipated to moderate to a range of 6.3% to 6.5% and headline inflation expected to stabilize gradually near 4% to 4.5%, the RBI is poised to maintain current rates through the majority of 2026. This outlook suggests a prolonged "lower-for-longer" rate environment with minimal policy intervention anticipated.
Fixed Income Strategy:
Amidst evolving market conditions, fixed income instruments are positioned to assume a meaningful role in diversified investment portfolios by enhancing stability and mitigating risk. The strategic focus is expected to pivot firmly towards accrual strategies, supported by stable interest rates, tightening systemic liquidity, and sustained structural demand for bonds.
Furthermore, India's increased probability of inclusion in the Bloomberg Bond Index, potential associated index inflows, strong domestic macroeconomic fundamentals, and balanced supply-demand dynamics provide a constructive outlook for the bond markets in 2026.
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