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Below the Reaction on Market at Life Highs: Upside Capped – Disciplined Allocation & Proactive Sector Rotation Advised by Utsav Verma, Head of Research, Choice Institutional Equities

CY2025 unfolded as one enveloped in volatility, shaped by a convergence of global and domestic challenges. Internationally, persistent geopolitical flashpoints (Russia-Ukraine, Iran-Israel, India-Pakistan), shifting central-bank priorities (from 2024 tightening to cautious easing) and spells of risk aversion (US Trade Tariffs) kept investors on edge. Domestically, uneven earnings delivery (lacklustre growth in top-line over the last 4 quarters) and jittery flows from foreign investors (FIIs are net sellers in FY25 & YTD FY26) aggravated market swings. Against this backdrop, Indian equities were marginally up, with headline indices mustering only modest gains despite the economy’s underlying resilience (Nifty 500 returned +6.9% CY25 YTD).

Market View
Now, we step into 2026 with renewed optimism. The long-awaited US–India trade agreement is likely to come to fruition soon, thus catapulting the US Exports back to normalcy and hopes for a Ukraine–Russia peace settlement are reshaping global risk sentiment favourably. At home, credit transmission is improving (WALR on new loans -63 bps), corporate earnings are showing early contours of an upswing (+12.8% Net Income for Nifty 500 in Q2FY26) and private capex is poised for acceleration (New Capex announcements from the private sector came in at 80%+ in H1FY26). While valuations still appear overstretched, ongoing time-correction creates scope for market leadership to emerge in select asset classes and sectors.

Positive: Aerospace & Defence, AlcoBev, Autos & Auto Anc., Building Materials, Capital Goods,Cement, Hospitals, Jewellery, NBFCs, Oil & Gas – Downstream, Pharma and Realty--

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