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PL Wealth, the wealth management arm of PL Capital (Prabhudas Lilladher), in its latest report Market Outlook – January 2026, noted that India is entering 2026 with a significantly stronger macroeconomic footing compared to most major global economies. While global markets continue to grapple with slowing growth, policy uncertainty and geopolitical tensions, India’s outlook remains relatively resilient. The report highlights that the country’s domestic growth momentum—driven by steady consumption, sustained public capital expenditure and healthier corporate balance sheets—is expected to provide stability to market performance, even as near-term volatility persists.

The report cited that 2025 marked a year of consolidation for Indian equities after several years of strong returns. While global equity markets delivered relatively healthy gains, Indian markets underperformed modestly as valuations moderated, foreign portfolio investors remained net sellers, and primary market supply stayed elevated. FPI outflows persisted for most of the year, influenced by higher US bond yields, a strong dollar, and uncertainty around global trade policies. In contrast, domestic institutional flows remained steady, supported by consistent SIP inflows, which helped cushion downside risks and limit sharp drawdowns.

Globally, economic growth in 2026 is expected to remain moderate but uneven. The US economy continues to grow, though at a slower pace, with GDP growth projected to cool further as financial conditions remain tight. Inflation in the US has eased to around 3%, but remains sticky above target, keeping markets focused on the timing and pace of rate cuts. The Federal Reserve’s policy rate currently stands in the 3.75–4.25% range following cumulative easing, with future actions expected to be data-dependent. In Europe, GDP growth is forecast at approximately 1.0–1.2%, weighed down by structural challenges and weak external demand, while China’s growth is expected to slow to around 4.7–4.8% in 2025 before stabilising, driven largely by domestic policy support rather than broad-based stimulus. Japan’s gradual policy normalisation remains a key global risk, with any sharp rise in yields having the potential to trigger cross-asset volatility.

Against this global backdrop, India’s macro outlook remains comparatively strong. India’s GDP growth for FY26 is expected to remain in the range of 6.5–6.8%, with some multilateral agencies projecting growth above 7%. Inflation has moderated sharply, with headline CPI dipping as low as 0.7% year-on-year in late 2025 and the FY26 average expected to remain around 2.0–2.3%, well within the RBI’s comfort band. This benign inflation environment has allowed the Reserve Bank of India to adopt a growth-supportive stance. The policy repo rate currently stands at 5.25% after cumulative cuts of approximately 125 basis points during 2025, supported by liquidity measures exceeding ?15.7 trillion through open market operations, CRR reductions, and buy-sell swaps.

Indian equity markets are expected to remain range-bound in the near term, with January 2026 likely characterised by selective opportunities rather than broad-based rallies. Valuations across large caps and quality mid caps have normalised following last year’s consolidation, shifting the market’s focus firmly towards earnings delivery. Large-cap stocks, particularly those with strong balance sheets and predictable cash flows, are expected to offer relatively better stability, while stock-specific opportunities may emerge in select mid-cap names as earnings visibility improves.

Inderbir Singh Jolly, CEO, PL Wealth Management, said, “India enters 2026 with a rare combination of strong growth, low inflation, and improving corporate fundamentals. While global uncertainties will continue to drive short-term volatility, the medium- to long-term investment case for India remains compelling. In this environment, disciplined asset allocation, a focus on quality, and patience will be far more rewarding than chasing short-term momentum”.

Sectorally, financials continue to remain a core portfolio anchor. Credit growth is expected to stay healthy, asset quality remains stable, and capital adequacy levels across banks and NBFCs are strong. Select private banks, PSU banks, and well-managed NBFCs offer attractive risk-reward, particularly during market corrections. Industrials and capital goods are also well positioned, supported by sustained government capex, infrastructure spending, and rising order books across defence manufacturing, power equipment, and infrastructure ancillaries.

Consumption trends are expected to broaden gradually through 2026. Urban consumption remains steady, while rural demand is likely to improve on the back of stable inflation, income growth, and a normal monsoon. Autos, consumer durables, and discretionary consumption are showing early signs of demand recovery, though stock selection remains critical. Telecom continues to benefit from stable cash flows and structural growth driven by rising data consumption. Healthcare and hospital services provide defensive stability with predictable growth and limited global dependency. Information technology services remain a selective space, as global demand recovery is expected to be gradual and uneven.

On the fixed income side, the outlook highlights a carry-friendly environment. Short-term yields have compressed significantly, with one-year Treasury bills yielding around 5.5% and five-year government securities around 5.8%. At the same time, long-end yields continue to offer attractive term premiums, with 10-year government securities yielding approximately 6.58% and 10-year state development loans around 7.39%, translating into a spread of nearly 70–75 basis points. PL Wealth Management advocates a balanced approach that combines stability and income from high-grade short- to intermediate-duration instruments with selective exposure to longer-duration bonds to capture yield opportunities, while maintaining a cash buffer of 7–12% to manage volatility and liquidity needs.

Commodities are expected to play a selective role in portfolios. Global commodity prices are forecast to decline by around 7% in 2026, extending a multi-year easing trend driven by moderate global growth and ample supply. Energy prices are expected to average between USD 60–70 per barrel, while agricultural commodities may remain under pressure due to strong global harvests. Precious metals, however, continue to stand out. Gold prices surged over 65% during 2025 to approximately USD 4,400 per ounce and are projected to remain firm in the USD 4,500–4,900 range in 2026, supported by central bank purchases, ETF inflows, and geopolitical uncertainty. Silver, which gained over 130% in 2025, is expected to trade in the USD 80–100 range amid strong industrial demand linked to energy transition themes.

PL Wealth Management concludes that while volatility is likely to persist in the coming months, India remains well positioned to outperform many global peers over the medium to long term. The firm advises investors to stay invested, remain selective, and use periods of market weakness to build exposure to high-quality assets aligned with long-term financial goals.