Indian Equities Likely To Post YoY Gains Through 2026: Standard Chartered

New Delhi, Dec 26 (KNN) Indian equities are likely to post year-on-year gains through 2026, supported by reflation in the economy, a potential revival in corporate earnings and the expected return of foreign portfolio investors, according to a report by Standard Chartered (SC).

Constructive Outlook for Indian Equities

In its report ‘Outlook 2026: Ride the Recovery Wave’, SC said it remains constructive on Indian equities in 2026, expecting markets to trend higher on improving macro conditions and a supportive earnings outlook. 

It highlighted a reflating economy, with nominal GDP growth projected to return to double digits alongside broad-based expansion and easing inflation.

The report notes that easing financial conditions, a recovery in consumption demand, partly supported by GST cuts, strong rural demand and bank deregulation are likely to drive the next phase of the corporate profit cycle.

Inflation and Policy Measures

Inflation has begun to show early signs of reflation after remaining at low levels in recent months. The report notes that reflationary measures such as tax cuts, higher public spending and lower interest rates are aimed at boosting demand, production and employment, helping counter deflationary pressures and support economic growth.

Foreign Investor Flows and Domestic Liquidity

After significant outflows in recent periods, foreign investor positioning is close to multi-decade lows, according to the report. Standard Chartered expects that an improvement in growth and earnings could lead to a return of foreign portfolio inflows.

Domestically, liquidity remains supportive, with equities becoming more attractive than bonds, potentially driving higher allocations in hybrid portfolios.

Low household equity exposure and continued financialisation of savings are expected to provide structural support.

Equity Allocation Preferences

Against this backdrop, Standard Chartered said it is overweight on large-cap equities, citing relatively attractive valuations, stronger earnings visibility and a higher margin of safety compared to mid- and small-cap stocks. Large-cap stocks are also expected to be the first beneficiaries of renewed foreign investor inflows.

The report is also overweight on mid-cap equities, pointing to strong earnings growth prospects and valuations that remain reasonable, while maintaining a more cautious stance on small-cap stocks.

(KNN Bureau)