Mumbai: As India moves into 2026, the stock market is at an important stage. After being driven mainly by strong domestic money flows, the focus is now clearly shifting to company earnings, policy support and overall economic health. Market experts believe this change will play a big role in deciding how equities perform in the year ahead.
How markets performed in 2025
The year 2025 was not easy for investors. Indian markets saw sharp ups and downs due to global uncertainty, policy worries and uneven earnings. Still, benchmarks ended the year in the green. The Nifty hit a lifetime high of 26,326 on December 1 and finished 2025 with gains of over 10 per cent. The Sensex rose by around 8 per cent during the year, showing recovery after last year’s correction.
Inflation cools, RBI turns supportive
Inflation trends remained a key factor for markets. After dropping to a record low in October, inflation edged up slightly in November but stayed well below the Reserve Bank of India’s medium-term target of 4 per cent. This gave the RBI enough space to support growth. The central bank cut the repo rate by 25 basis points and hinted that it could continue with an easy policy if inflation stays under control. RBI expects inflation to average 2.9 per cent in the March quarter.
Earnings recovery takes shape
Brokerages see early signs of a cyclical recovery. Axis Direct said earnings growth is becoming visible across sectors like financial services, consumer businesses and capital-heavy industries. India stands out among major global markets where short-term recovery is lining up with long-term growth trends. Axis AMC also noted that valuations have cooled to near long-term averages and earnings appear to have bottomed out.
Why 2026 looks brighter
Experts are more hopeful about 2026. Rate cuts, strong government spending, tax relief and steady GST collections are expected to boost demand. Improving global conditions and easing trade concerns with the US could also attract foreign investors. Sectors such as banking, autos, consumer goods, industrials, pharma, telecom, hotels and healthcare are expected to benefit as growth picks up.
